Dispatches from a Small Business

You Mean It Was Just A Money Grab? I'm So Disillusioned

U.S. states have not lived up to their commitment to devote a major
portion of their huge legal settlement with the tobacco industry a
decade ago on anti-smoking efforts, health advocacy groups said on
Tuesday.

In the 10 years since the landmark deal, the states have received
$79.2 billion of the settlement and another $124.3 billion from tobacco
taxes, but have spent only about 3 percent of it — $6.5 billion — on tobacco prevention and cessation programs, the groups said in a report.

Gee, I really thought the settlement was about health care and tobacco education, and now I find out it was just a crass money grab? Who could have ever predicted that?

Tort Reform in Mississippi

One of the worst places, in
term of frivolous lawsuits, was Jefferson County. It became renowned as
the lawsuit capital of the country, with more plaintiffs than
residents. This is the infamous county where one pharmacist was named
in more than 1,000 lawsuits. In one legendary case against a
pharmaceutical company that sold the diet pill Pondimin (part of the
weight-loss combination known as fen-phen, which was later banned), a
Jefferson County jury awarded $1 billion to the family of a woman who
had taken the drug.

But four years ago, Mississippi transformed itself
from judicial hell hole to job magnet, a story that is instructive for
other states trying to attract jobs in turbulent economic times. The
lessons here are especially timely, because the pro-growth tort reform
trend that was once spreading across the country may soon reverse
course....

Almost overnight, the flow
of lawsuits began to dry up and businesses started to trickle in.
Federal Express invested $1 billion in a new facility in the state.
Toyota chose Mississippi over about a dozen other states for a new $1.2
billion, 2,000-worker auto plant. The auto maker has stipulated that
the company would pull up stakes if the tort reforms were overturned by
the legislature or activist judges.

That hasn't happened. About 60,000 new jobs have
arrived in four years – not a small number in a workforce of about 1.3
million – and a sharp improvement from the 30,000 jobs lost in the four
years before Mr. Barbour took office. Since the law took effect, the
number of medical malpractice lawsuits has fallen by nearly 90%, which
in turn has cut malpractice insurance costs by 30% to 45%, depending on
the county.

On Honest Engineering Discourse

TJIC links to this great story about the engineer for the Citicorp building who realized, after the building was erected and occupied, that he had made a mistake that could make the building unsafe in high wind loads. He raised his hand, called a penalty stroke on himself, and got the thing fixed when many others might have rationalized away taking action. Fortunately, he was respected for doing so:

Before the city officials left,
they commended LeMessurier for his courage and candor, and expressed a
desire to be kept informed as the repair work progressed. Given the urgency
of the situation, that was all they could reasonably do. "It wasn't a case
of 'We caught you, you skunk,'" Nusbaum says. "It started with a guy who
stood up and said, 'I got a problem, I made the problem, let's fix the
problem.' If you're gonna kill a guy like LeMessurier, why should anybody
ever talk?"

I continue to worry, though, that we are actively aligning incentives against having a quality, open engineering dialog. In any engineering discussion, I don't think there has been a good safety dialog unless someone takes the position that the design (or drug, or whatever) is still unsafe. Someone needs to advocate the position that the plan is unsafe even if that position is a straw man. An open process encourages everyone to raise potential issues, even if these issues turn out not to be problems.

Unfortunately, in court, the very existance of such a discussion is used as evidence of liability. Plaintiff's lawyers wave internal memos at juries showing them that concern existed about safety. The very healthy definition of a good safety engineering process - a concern and discussion about safety - is turned into evidence of its lack. More here.

What is Wrong With Tort Law

Despite seeing all kinds of major problems in tort law today, I have never been a huge proponent of many tort law reforms (though I support loser pays). I don't see why my ability to pursue legitimate damages in court should be curtailed. What all these tort law reforms never get at is this:

A Glendale jury on Friday cleared an emergency room doctor of
negligence and liability in John Ritter's death, holding he did
everything he could to save the comic actor. ... Jurors, who voted 9 to
3 against liability for Lee and Lotysch, said they were torn between
sympathy for Ritter's wife and children and their conviction that the
doctors were blameless.

The fact that the jury is at all conflicted on this point represents a huge miscarriage of justice, but this goes on every day in court. In fact, if the doctors had worked for Exxon, you can bet Exxon would have been paying despite being blameless.

What patients (and juries) really seam to want is bad outcomes insurance rather than malpractice insurance. This is in part born out by the fact that researchers can usually find little statistical relationship between truly bad doctors and the size of court malpractice payouts. Maybe the answer to malpractice insurance is to convert it to a workers-comp-like no-fault insurance systems that pays off on bad/unexpected outcomes following a fixed schedule and keeps everything out of court. The reduction in legal costs alone would be staggering.

Enron Class Action Lawyers Attempt to Extort More than Enron Management Was Ever Accused Of

No More Mike's Hard Lemonades For Me

OK, perhaps it is a guilty pleasure, but I enjoy downing a couple of Mike Hard Lemonade's on a hot afternoon. Now, it seems, the Food Nazi's at the Center for Science in the Public Interest want to stop me"

Public Citizen's blog announced that CSPI
plans to sue the beverage sellers, asking for disgorgement of profits
from flavored malt beverages, unless they agree to take them off the
market. Their theory? By making flavored alcoholic beverages that taste
good, they are effectively marketing to children. (Because, after all,
adults don't like beverages that taste good.)

Key Fact Missing

The AP does a great job in this story reporting absolutely everything but the most important fact:

The Supreme Court has refused to offer help to Hurricane Katrina
victims who want their insurance companies to pay for flood damage to
their homes and businesses.

Wow, those insurance companies suck, and they have the Supreme Court in their pocket. The only teeny-tiny fact missing is that the people suing had policies that very explicitly did not cover flood damage. They sortof acknowledge this but say the insurance companies should pay anyway, because the flood was caused by a broken levee and that somehow is not really the same kind of flood, sort of. Or whatever.

Today's Correlatoin Not Equal Causation Moment

I was very amused by Brockovich's remark "It is no coincidence that
thousands on Avandia now have heart attacks." Really? Thousands of
people who saw Erin Brockovich in the theaters have had heart
attacks, and many others have had strokes. Some even contracted cancer!
Coincidence, or has Ms. Brockovich put movie royalties ahead of safety?

New Grisham Novel

I have not been able to read a Grisham lawyer novel since "the Runaway Jury," which was an absolutely amazing ode to the joys of jury tampering. Seldom does one see an author treat so many abuses of due process and individual rights so lovingly, all because it is OK to take away a defendant's right to a fair trial as long as the defendant is an out-of-favor corporation. (On the other hand, Grisham's "the Painted House," about growing up on a small cotton farm in the south, is wonderful).

Grisham's biases in the Runaway Jury become clearer to me now that I now he pals with Dickie Scruggs, notorious Mississippi tort lawyer who is soon to be sharing a cell next to Jeff Skilling, that is unless they can delay his investigation until Jon Edwards is attorney general.

With what might seem like startlingly bad timing, Scruggs chum/novelist (and campaign donation co-bundler,
if that's the right term) John Grisham is just out with a new fiction
entitled The Appeal, whose thesis, to judge by Janet Maslin's oddly favorable review in the Times,
is that the real problem with the Mississippi judicial system is that
salt-of-the-earth plaintiff's lawyers are hopelessly outgunned in the
task of trying to get friendly figures elected to judgeships to sustain
the large jury verdicts they win. One wonders whether any of Maslin's
editors warned her about recent news events -- she doesn't seem aware
of them -- that suggest that the direst immediate problems of the
Mississippi judiciary might not relate to populist plaintiff's lawyers'
being unfairly shut out of influence. Of course it's possible she's not
accurately conveying the moral of Grisham's book, and if so I'm not
likely to be the first to find out about it, since I've never succeeded
in reading more than a few pages of that popular author's work. By the
way, if you're wondering which character in the novel Grisham presents
as the "hothead with a massive ego who hated to lose,” yep, it's the
out-of-state defendant.

Thanks, Trial Lawyers

Because of the all-to-prevalent theory (which may become even more common if Jon Edwards becomes our next AG) that every accident must be the fault of the nearest person with deep pockets, I wasted an hour today.

I visited the NFL experience today with my son. The NFLX is a kind of football-themed fair or amusement park that the NFL sets up near the site of each Superbowl (HA HA NFL -- I said it. I said "Superbowl" and not "the big game." Come and get me). After waiting in a reasonable line to enter, we found that to play the games (e.g. throw the football through a hoop) every participant (read 10,000+ people) had to individually fill out and sign a liability waiver and get a wristband attesting to the fact. There were about 16 clerks at work, but it still was about an hour-long wait.

It struck me that the NFL could have come up with a much better process. Why not have people with Internet access (about everyone, since almost 98% seemed to be there with tickets they bought on the internet) print out the waiver and bring it with them already filled out? The manager on-site claimed that Arizona state law and the Arizona AG required that the process proceed the way it did. I give that explanation about a 50-50 between being correct and just covering their butt for something stupid.

Anyway, once signed, we had a good time at the event, and it was well worth the effort.

The industry's lawyer in the case, Ira Schwartz, argues in a brief
filed earlier this month that the MP3 files Howell made on his computer
from legally bought CDs are "unauthorized copies" of copyrighted
recordings.

"I couldn't believe it when I read that," says Ray Beckerman, a New
York lawyer who represents six clients who have been sued by the RIAA.
"The basic principle in the law is that you have to distribute actual
physical copies to be guilty of violating copyright. But recently, the
industry has been going around saying that even a personal copy on your
computer is a violation."

I guess I am guilty too, as I have ripped all 400 of my CD's twice to computers, once in MP3 format for my iPod and once in FLAC format for my home audio system. All for my own, personal, fair use, because I prefer random access memory over 400 physical discs in boxes as a storage medium for my music. I used to just listen to four or five CDs at a time, and rotate them for a month until I got up the energy to change them out. Now, I listen to much more of my own music now that it is in a more accessible format.

Wow, Media Sees Dumb Lawsuit for What it Is

In the earlier days of this blog, I used to post links to a lot of insane lawsuits. The lawsuits just keep coming, but I have lost the energy to keep posting such stupidity. And besides, Overlawyered does such a good job and seems to have infinite patience.

But it was worth noting a silly shareholder suit that the media actually seems to have sniffed out for what it is: Pure garbage. For those who are not aware, there are a group of law firms who immediately file suit against any company whose stock drops by more than a few percent. Bill Lerach, soon to be taking up residence in jail, used to keep a whole bullpen of folks on a sort of retainer to hold shares in numerous companies, so he instantly had someone close at hand who could file suit when any stock drops. And since stocks go up and down, often in ways that the company itself has no control over, this leads to a lot of lawsuits.

Anybody who purchased stock in
Niwot-based Crocs Inc. between July 27 and Oct. 31 should not join the
class-action shareholders lawsuit that was recently filed against the
company and its stock-dumping executives.

Instead, they should look themselves in the mirror and admit two things:

I look ridiculous in these plastic shoes.

Anybody
who would pay an average of more than $60 a share for a company that
makes ugly plastic shoes deserves to take a hit in the stock market.

He continues:

Crocs and its officers also allegedly
misrepresented or failed to disclose their distribution problems in
Europe and their rising inventory levels, the lawsuit alleges. They
also failed to disclose that sales of their hole-riddled plastic clogs
were suddenly becoming more of a seasonal item. Imagine that! Sandals
seasonal? Who knew?

By the way, if you really want your head to explode, take a minute a think about shareholder lawsuits. A group of shareholders are suing the company for a fall in the stock price. Who do you think pays? Why, current shareholders! Though I do not accept the "logic" of these suits, if one were to accept their logic, then the most guilty party is the stockholder who sold the plaintiffs their stock just before the drop. But these folks are exactly who will NOT owe any money on the suit. They are no longer owners. The people who will pay will be the owners of the stock at whatever time the suit settles, likely many people who bought in after the plaintiffs did. The only real winner when the shareholders pay themselves such a verdict are the lawyers, who rake off 30%. More on this bizarre situation here.

Update: I will have to think about this more, but it kind of reminds me of a prisoners dilemma game in which the prosecutor gets a monetary bonus that increases with longer prison terms.

Great Moments In Justice

Joe Meadows was drunk. Very drunk. 0.296 percent blood-alcohol content
drunk, 12 or 13 beers worth. Fortunately, he didn't drive in that
state. Unfortunately, he chose to sleep it off by resting under a
parked 18-wheel truck. More unfortunately, the driver, Doug Rader, who
didn't check to see whether there might be drunks lying under his truck
at 1:40 a.m., ran over Meadows. Rader had EMT training, and was able to
save Meadows's life, but Meadows lost a leg, and sued both the truck
company and the store that owned the parking lot. A Kanawha County jury
decided that Meadows was only a third responsible for his injury, which
means he "only" gets two thirds of the three million dollars they
awarded.

"A police officer has sued the family of a 1-year-old boy who nearly
drowned because she slipped and injured a knee responding to their
9-1-1 rescue call." Andrea Eichhorn, a police sergeant in Casselberry,
Florida, responded to the pool accident, and now "claims the boy's
family left a puddle of water on the floor, causing her fall during the
rescue efforts. She broke her knee and missed two months of work." So
she's suing the Cosmillo family. "It's a situation where the Cosmillos
have caused these problems, brought them on themselves, then tried to
play the victim," says her attorney, David Heil. Joey Cosmillo, the
infant in question, suffered severe brain damage and lives in a nursing
home now.

Great Moments in Torts

A Pennsylvania man has sued search giant Google
for $5 billion, claiming that when his Social Security number is turned
upside down, "it is a scrambled code that does spell the name Google."
The handwritten complaint filed in the U.S. District Court in Scranton
alleges that the U.S. Justice Department "is heading the investigation
into allegations of crimes against Humanity" involving Google's
founders and that the plaintiff's "safety is in jepordy."

Up next, the owner of Social Security number 71077345 sues Shell Oil for the same reason.

Unfortunately, in other tort news, this is not a laughing matter. It is just plain stupid AG megalomania:

For a while now, lawyers in Minnesota, Oklahoma and elsewhere have been suing companies that make over-the-counter cold remedies containing ephedrine and pseudoephedrine on the grounds that they were aware
some buyers were using the drugs as raw material for illegal
methamphetamine labs. Now such litigation appears to be gaining
momentum in Arkansas, where many county governments have signed up to
sue Johnson & Johnson, Pfizer, and other companies. "If successful,
it could open up litigation against manufacturers of other produce used
in making meth, such as drain cleaners and acetone."

One local judge discusses the case in a way that sounds like a commercial for the Publishers Clearing House Sweepstakes:

"What more could we have done with a million dollars a year for our
county? Would that have meant a half dozen more police officers? Would
that have meant a better solid waste program? Who knows, what could
your county have done with an extra million dollars," asked Judge Bill
Hicks of Independence County, a backer of the suits.

The Next State AG Boondoggle

Chris Horner reports that the next mass-state-AG-tort, modeled after their fairly succesful efforts against tobacco companies, will be against oil companies over global warming:

A little birdie recently chirped about some
usual-suspect state attorneys general preparing a litigation strategy
document for/with environmental pressure groups, providing a roadmap
for cooperatively replicating the tobacco litigation of a decade ago in
the "global warming" context, substituting that projected catastrophe
for cancer and "big energy" for tobacco companies.

The point of
such exercise would not be to litigate the matter to conclusion — ever
more challenging what with forced corrections of the temperature
record, recent exposure of the woeful reliability of our own world's
most reliable surface measuring network, and of course no global
warming in a decade (or, we now know, since 1900 for that matter) — but
to extract massive settlements from the energy industry to further fund
the trial lawyers, greens and the greens' pet projects. Just imagine
the anti-energy campaign that this model would yield! And at no cost,
really, except to anyone who uses energy and/or invests in these sleepy
"granny stocks". Oh, and the economy.

He goes on to include a copy of the memo making the rounds of the AG offices. This will certainly be a circus, and generally an expensive time-waster that will just serve to line the pockets of tort lawyers and the politically connected. If things turn out like the tobacco settlement, the oil companies may jump on board early, since the tobacco settlement has turned into a state-enforced oligopoly for the major tobacco companies. On the bright side, this might be an opportunity to subpoena the details of a bunch of climate work that is currently kept secret.

Great Moments In Personal Responsibility

Score another one for personal responsibility: 29-year old St. Louis
Cardinals pitcher Josh Hancock killed himself in April when he drove --
faster than the speed limit, drunk, on a cell phone, and not wearing a
seat belt -- into a tow truck stopped on the side of a road. Obviously,
we ought to blame... everyone except Josh Hancock for this. Three and a
half weeks after the accident, his father has filed suit
in St. Louis against: the restaurant where Hancock was drinking, the
manager of the restaurant, the tow truck driver, the towing company,
and (!) the driver of the stalled vehicle that the tow truck was
assisting, for having the temerity to get his car stuck on the side of
the road.

So far, he hasn't sued the Cardinals or Major League Baseball, but, while praising the team, his lawyer pointedly refused to rule out suing them.

How NOT to Choose a Copyright Attorney

And while we are on the subject of class actions, note this case in Overlawyered where the class itself received a sum total (not average per person, but cumulative total) of $2,402 while their lawyers received $1,000,000. Once a useful tool for redressing fraudulent behavior, class actions now have become primarily either 1) a profit-making-through-extortion tool for lawyers or 2) a way to legislate without actually going to the legislature.

13 Identical Litigatable Injuries Sustained in One Week

Patterico has a link to this interesting account of a week in the life of Jarek Molski, who makes a living from filing ADA suits (emphasis added):

For example, in Molski v. El 7 Mares Restaurant, Case
No. C04-1882 (N.D. Cal. 2004), Molski claims that, on May 20, 2003, he
and significant other, Brygida Molski, attended the El 7 Mares
Restaurant for the purposes of dining out. Molski alleges that the
restaurant lacked adequate handicapped parking, and that the food
counter was too high. After the meal, Molski attempted to use the
restroom, but because the toilet’s grab bars were improperly installed,
he injured his shoulders in the process of transferring himself from
his wheelchair to the toilet. Thereafter, he was unable to wash his
hands because of the lavatory’s design.

Although this complaint appears credible standing alone, its
validity is undermined when viewed alongside Molski’s other complaints.
In Molski v. Casa De Fruta, L.P., Case No. C04-1981 (N.D. Cal. 2004),
Molski alleges that he sustained nearly identical injuries on the exact
same day, May 20, 2003. In Casa de Fruta, Molski alleges that he and
significant other, Brygida Molski, patronized Casa de Fruta for the
purpose of wine tasting. On arrival, Molski was again unable to locate
van accessible parking. Once inside, Molski again found the counter to
be too high. After wine tasting, Molski again decided to use the
restroom, and again, injured his upper extremities while in the process
of transferring himself to the toilet. Thereafter, he was once again
unable to wash his hands due to the design of the lavatory.

This was, apparently, not the end of Molski’s day. In Molski v.
Rapazzini Winery, Case No. C04-1881 (N.D. Cal. 2004), Molski once again
alleges that he sustained nearly identical injuries on the exact same
day, May 20, 2003. Molski, again accompanied by Brygida Molski, claims
he visited the Rapazzini Winery for the purpose of wine tasting. Again,
Molski complains that the parking lot lacked adequate handicapped van
accessible parking. Upon entering the establishment, he discovered that
the counter was too high. After tasting wine, he again needed to use
the restroom. In the course of transferring himself from his wheelchair
to the toilet, he injured himself yet again. Thereafter, he was again
unable to wash his hands due to the lavatory’s design.

The Court is tempted to exclaim: “what a lousy day!” It would be
highly unusual — to say the least — for anyone to sustain two injuries,
let alone three, in a single day, each of which necessitated a separate
federal lawsuit. But in Molski’s case, May 20, 2003, was simply
business as usual. Molski filed 13 separate complaints for essentially
identical injuries sustained between May 19, 2003 and May 23, 2003. The
Court simply does not believe that Molski suffered 13 nearly identical
injuries, generally to the same part of his body, in the course of
performing the same activity, over a five-day period. This is to say
nothing of the hundreds of other lawsuits Molski has filed over the
last four years, many of which make nearly identical allegations. The
record before this Court leads it to conclude that these suits were
filed maliciously, in order to extort a cash settlement.

Punitive Damages and Due Process

For several years, I have been wondering why punitive damage awards like this one, that punish a company for various misdeeds, don't create a double jeapardy situation where defendents must pay over and over for the same "crime" (since the next individual suing also gets punitive damages).

Here's the problem: A jury in Texas already hit Merck with $259
million in punitive damages*. This number was based on a lot of
testimony about Merck's sales and profits from Vioxx, so it was
presumably aimed at punishing Merck for "errors" in their whole Vioxx
program. So if that is the case, how can Merck end up facing a jury
again coming up with a separate punitive damage award for the same
"crime"? Sure, it makes sense that Merck can owe actual damages to
individual claimants in trial after trial. But how can they owe
punitive damages for the whole Vioxx program over and over again?
Aren't they being punished over and over for the same misdeed,
violating their Constitutional protection against double jeopardy?

Today, in a decision involving an astonishing $79.5 million punitive
damage award to the widow of an Oregon man who died of lung cancer
after smoking Marlboros for 42 years, the U.S. Supreme Court ruled
that a jury in a civil case may not punish a defendant for harm to
people who are not parties to the case. To do so, the five-justice
majority said,
violates the defendant's right to due process because he cannot defend
against hypothetical damage claims by people who are not involved in
the lawsuit. Furthermore, the Court said, "to permit punishment for
injuring a nonparty victim would add a near standardless dimension to
the punitive damages equation." Although this makes sense to me, the
Court's proposed solution—that juries may consider harm to nonparties
in judging the "reprehensibility" of a defendant's conduct but not to
"punish a defendant directly" for that harm—seems untenable.

Who's In Charge Here, Part 2

It used to be that clients would suffer some sort of injury and seek
redress in the courts. To do so, they would hire an attorney to help
them. The attorney was the hired help, compensated either hourly or
via a percentage of any awards.

Today, the situation is often reversed. It is the attorney who is
identifying lawsuit targets for class actions and shareholder suits,
and then seeking out clients who can maximize his chances of success.
Clients, who typically make orders of magnitude less than the attorney
in class actions (think 50-cent coupons and $8 million attorney fees)
are selected because they are sympathetic, or give access to a
particularly plaintiff-attractive jurisdiction, or, in cases such as
ADA suits in California, because they have effectively become partners
with the attorney in serial torts.

Judge Scott Rosenberg ruled Friday that Microsoft attorneys could
not ask the named plaintiffs about their relationship with attorney
Roxanne Conlin. The company's lawyers wanted to question the
plaintiffs, arguing that Conlin had referred to them during jury
selection as "just regular people who bought software" and who
volunteered to step forward to sue Microsoft.

The lawsuit was brought by Joe Comes, a Des Moines businessman who
owns a chain of pizza restaurants, and Patricia Anne Larsen, a retiree
from northwest Iowa, and two business _ Riley Paint Inc. of Burlington
and Skeffington's Formal Wear of Iowa Inc. of Des Moines.

Microsoft attorney David Tulchin said Larsen has been a friend of
Conlin's since 1982, when Larsen held fundraisers for Conlin's failed
run for governor. In 1999, Conlin represented Larsen in an employment
discrimination case against Larsen's former employer, Eaton Corp.

Tulchin said Comes has been Conlin's son's best friend since high school.

Microsoft attorneys claimed Conlin recruited these friends to act as
plaintiffs in the case so she could sue the company and that her
comments during jury selection opened the door for Microsoft to
challenge the plaintiffs' motivation in filing the lawsuit.

Who would even imagine such a thing? In this class action, as in many, the class members will probably get coupons while Conlin makes millions. Or, as Microsoft observes:

Tulchin claimed that Conlin and her co-counsel, Richard
Hagstrom of Minneapolis, have the most to gain in the lawsuit

Attorneys like Conlin know they are vulnerable on this

Conlin said Microsoft wants the jury to believe that class-action
lawsuits are attorney-driven cases brought for money when in reality
they are a way for individuals with small claims to come together to
take on large, powerful companies.

"Businesses like Microsoft have poisoned the public view of these
forms for seeking redress by spending billions of dollars to spread
propaganda. Now they seek to collect on their investment by improperly
suggesting to the jury that the plaintiffs are not real plaintiffs,"
she said.

The State of Litigation

The nation's leading class-action lawyer, Bill Lerach, is currently in
an ugly scrape in federal court in Dallas, where the sole lead
plaintiff in a high-profile shareholder suit against Halliburton (HAL)
no longer wants Lerach or his firm to act as its co-lead counsel. (I've
posted about it before here and here.)
To recap, the fund has said that it is concerned about all the
distractions and the sleaze factor now surrounding Lerach and his prior
firm, Milberg Weiss Bershad Hynes & Lerach (which Lerach co-ran)...

The squeamish plaintiff, the Archdiocese of Milwaukee
Supporting Fund, has asked that Lerach Coughlin be replaced by David
Boies and his firm, Boies Schiller & Flexner, which firm has
indicated that it is ready, willing, and able to assume the role.

Needless to say, Lerach is fighting the uppity plaintiff to keep control of the case.

Parloff goes on to question some of Lerach's statements in the case. However, I want to make a different point. This points out fairly clearly that Lerach and other top litigators have adopted a whole new theory of litigation and of the relationship between lawyer and client.

It used to be that clients would suffer some sort of injury and seek redress in the courts. To do so, they would hire an attorney to help them. The attorney was the hired help, compensated either hourly or via a percentage of any awards.

Today, the situation is often reversed. It is the attorney who is identifying lawsuit targets for class actions and shareholder suits, and then seeking out clients who can maximize his chances of success. Clients, who typically make orders of magnitude less than the attorney in class actions (think 50-cent coupons and $8 million attorney fees) are selected because they are sympathetic, or give access to a particularly plaintiff-attractive jurisdiction, or, in cases such as ADA suits in California, because they have effectively become partners with the attorney in serial torts.

So if you wonder why Lerach is suing his client for not using his services, and if that makes you wonder who is working for whom, now you know.

Update: By the way, this reversal of the relationship between attorney and client is one of the recurring themes in my novel BMOC.

Should Juries Be Able to Ban Products?

I have written on this before on the context of Vioxx, but is it really rational public policy to have juries be allowed to effectively ban products, products that both legislatures and regulatory bodies have explicitly or implicitly deemed as legal? Ted Frank takes this on at Overlawyered in a nice follow-up post on a $31 million jury verdict against Ford:

SUVs are designed to have high clearance to traverse rugged terrain.
This raises the center of gravity and affects the handling: it's a
known tradeoff of the laws of physics. There are a wide variety of
tests of varying degrees of scientific merit one can use to suggest a
vehicle is "too prone" to roll over, and plaintiffs have the benefit of
cherry-picking which tests to apply to which vehicles. You'll find lots
of lawyers complaining that the Bronco II allegedly responded poorly in
"J-turn tests", where the steering wheel is turned 330 degrees in one
third of a second and held there for another 4.67 seconds. Ford
designed the Explorer to pass the J-turn test to take away this claim,
and the trial lawyers started using different methodologies to claim
that the Explorer was too prone to roll over.

Empirically, however, the Bronco doesn't roll over more than several
other SUVs on the market, which is why NHTSA, in both the Bush I and
Clinton administrations, refused to recall the Bronco when the
plaintiffs' bar asked it to. When I say Ford was held liable for
producing an SUV, I'm not spinning: it was because it was held liable
for producing an SUV.

Moreover, a vehicle should be viewed in totality: an auto that is
more likely to roll over may be safer in other particulars that more
than compensate for that increased propensity. So I question the
premise. One can't change the rollover propensity without creating a
different vehicle entirely. The vehicle should be viewed holistically,
and holistically, the Bronco is a safe car when used as designed.

Perhaps we as a society would be better off taking the nanny-state
step of banning SUVs, forbidding people from wildnerness driving
because too many drivers don't know how to drive SUVs in highway
conditions, but that's a decision that not only would end the American
auto industry, but should be made other than by a 12-person jury of
laypeople. This vehicle rolled over because the driver drove off the
road.

Anyway, the point of this post is that this verdict represents a very dangerous assault on individual choice. Recognize that there are many, many activities in life where individuals are presented with the following choice:

If I choose to do X, my life will be improved in some way but I may statiscally increase my chance of an early death.

You
may react at first to say that "I would never risk death to improve my
life", but likely you make this choice every day. For example, if you
drive a car, you are certainly increasing your chance of early death
via a auto accident, but you accept this risk because driving allows
you to get so much more done in your life (vs. walking). If you ride a
bike, swim, snow ski, roller blade, etc. you are making this choice.
Heck, everyone on the California coast is playing Russian Roulette with
an earthquake in exchange for a great climate, beautiful scenery, and
plentiful jobs.

The vast majority of drugs and medical therapies carry this same
value proposition: A drug will likely improve or extend your life in
some way but carries a statistical chance of inducing a side effect
that is worse than the original problem, up to and including death.
The problem is that we have structured a liability system in this
country such that the few people who evince the side effects can claim
more money in damages than the drug was worth to all the people it
helped. For example, if a drug helps 999 people, but kills the
thousandth, and that thousandth person's family is awarded $253 million
in damages (as in this case), the drug is never going to be put on the
market again. Even if the next 1000 people sign a paper saying we are
willing to take the one-in-a-thousand risk to relieve the pain that is
ruining our lives, they still are not going to get the drug because the
drug companies know that some Oprah-loving jury will buy the argument
that they did not understand the risk they were taking and award the
next death another quarter of a billion dollars....

By the way, have you noticed the odd irony here? Robert Ernst (the
gentleman who died in the Vioxx case) is assumed, both by the FDA and
the litigation system, to be unable to make informed decisions about
risk and his own health. But a jury of 12 random people who never
experienced his pain can make such decisions for him? And us?

How did we arrive at a system in which 12 random Texans are assigned
responsibility for evaluating the scientific merits of statistical evidence of
this type, weighing the costs and benefits, and potentially
sending a productive blue-chip American company into bankruptcy protection?

Hey, I'm Suing Cisco

Did I want to sign up for the largesse, it inquired. It politely
offered me the option of declining, saying, "IF YOU DO NOT WISH TO BE
INCLUDED IN THE CLASS AND YOU DO NOT WISH TO PARTICIPATE IN THE
PROPOSED SETTLEMENT DESCRIBED IN THIS NOTICE, YOU MAY REQUEST TO BE
EXCLUDED." (The capitalization is theirs. I am not usually that
annoying.) Well, THANK GOD, I said. I can opt out of a lawsuit that was
filed in my name without my approval if I should have, well, you know,
scruples.

Except, as lawyers like to say, don't neglect to
read the next sentence. And the next, and the next, and the next, and
the next. Somewhere in there is the gotcha. "TO DO SO, YOU MUST SUBMIT
A WRITTEN REQUEST FOR EXCLUSION THAT MUST BE RECEIVED ON OR BEFORE
OCTOBER 31, 2006."

All right, now. I got the letter on
November 13, 2006. Admittedly the U.S. Post Office is slow, but I'll
give them credit for getting a letter from the West Coast to
Mississippi in less than 14 days. Unfortunately, the letter was mass
mailed and thus bypassed the local post office. It bore no postmark. In
other words, I got the letter two weeks too late to opt out of the
lawsuit, and I had no postmark to prove it was intentionally mailed out
late to prevent me from refusing to participate. The old expiration
date trick. That was slick, Mssrs. Lerach, Coughlin, Stoia, Geller,
Rudman, Robbins, Levin, Papantonio, Thomas, Mitchell, Echsner, &
Proctor -- real slick.

He is even more non-plussed to learn that he is in line for a check for $0.90, while the lawyers are in for $23.9 million. I feel his pain. I, for example, have been informed on several occasions that Visa and Mastercard, among others, are being sued in my name, though I never engaged anyone to do so.

Among the alleged abuses were
bills of $195 an hour for work by paralegals who were paid just $30,
claims that attorneys and paralegals worked 24-hour or even 72-hour
days, and charges of $90 an hour or more for cleaning desks and
filing....

According
to records filed with the federal court, individuals at one legal group
representing the class, the Law Offices of John Burris in Oakland,
billed as much as 72 hours in a single day for document review and, in
dozens of instances, billed for 24-hour days.

Of course the attorneys had a strong rebuttal to these revelations:

The lawyers accused of overstating their hours and expenses responded
by strenuously objecting to Judge Armstrong about the public disclosure
of their billing records, which the attorneys said were confidential.

Warning Signs For Trespassers

Yet another nutty jury has decided that it should be national policy to have warning signs every few feet on a railroad to warn trespassers against danger:

Jeffrey Klein and Brett Birdwell were 17 "when they trespassed onto
railroad property and climbed atop a rail car" because they wanted to
see the view from there. They were shocked by a 12,500-volt wire and
severely injured. The incident took place in Lancaster, Pa. but through
the miracle of forum selection the lawsuit against Amtrak and Norfolk
Southern landed before a jury in Philadelphia, a locality notably more
favorable for plaintiffs than Lancaster. An attorney said the railroads
should have posted signs for the benefit of trespassers warning of the
overhead hazard and also should have had the electricity turned off at
the time.

that
the railroad was negligent for failing to post signs warning 'of the
dangers of walking near train tracks and that the tracks were actively
in use

Lets leave aside the obvious point
about individual responsibility, and ask what would happen if this were
the legal standard, to have such signs. To make sure someone saw one,
you would have to have one say every 30 feet. Since there are just over 200,000 miles of freight railroads in the North America that works out to a bit over 35,000,000 signs that need to be posted. At $100 per sign this would cost $3.5 billion.

Amazing Disclaimer

My company runs recreation areas, and from time-to-time customers try to file claims against our company for dangers that are inherent to being out in nature (example: "I was climbing a tree out in the forest and fell down and hurt myself. Your company needs to pay my medical bills.")

The Preserve does not provide rangers or security personnel. The other people in the preserve, including other visitors, our employees,
agents, and guests, and anyone else who might sneak in, may be stupid,
reckless, or otherwise dangerous. They may be mentally ill, criminally
insane, drunk, using illegal drugs and/or armed with deadly weapons and
ready to use them. We aren't necessarily going to do anything about it.
We refuse to take responsibility.

If you climb, you may die or be seriously injured. This is true whether
you are experienced or not, trained or not, equipped or not, though
training and equipment may help. It's a fact, climbing is extremely
dangerous. If you don't like it, stay at home. You really shouldn't be
doing it anyway. We do not provide supervision or instruction. We are
not responsible for, and do not inspect or maintain, climbing anchors
(including bolts, pitons, slings, trees, etc.) As far as we know, any
of them can and will fail and send you plunging to your death. There
are countless tons of loose rock ready to be dislodged and fall on you
or someone else. There are any number of extremely and unusually
dangerous conditions existing on and around the rocks, and elsewhere on
the property. We may or may not know about any specific hazard, but
even if we do, don't expect us to try to warn you. You're on your own.

Rescue services are not provided by the Preserve, and may not be
available quickly or at all. Local rescue squads may not be equipped
for or trained in mountain rescue. If you are lucky enough to have
somebody try to rescue you or treat your injuries, they may be
incompetent or worse. This includes doctors and hospitals. We assume no
responsibility. Also, if you decide to participate in a rescue of some
other unfortunate, that's your choice. Don't do it unless you are
willing to assume all risks.

By entering the Preserve, you are agreeing that we owe you no duty of
care or any other duty. We promise you nothing. We do not and will not
even try to keep the premises safe for any purpose. The premises are
not safe for any purpose. This is no joke. We won't even try to warn
you about any dangerous or hazardous condition, whether we know about
it or not. If we do decide to warn you about something, that doesn't
mean we will try to warn you about anything else. If we do make an
effort to fix an unsafe condition, we may not try to correct any
others, and we may make matters worse! We and our employees or agents
may do things that are unwise and dangerous. Sorry, we're not
responsible. We may give you bad advice. Don't listen to us. In short,
ENTER AND USE THE PRESERVE AT YOUR OWN RISK. And have fun!

Find the Deep Pockets

In my new novel, one of the elements of humor is added by a fictional law firm that has no sense of right and wrong but a very finely tuned sense for who has deep pockets. Early readers of the book have accused me of exaggerating reality. In fact, all the humorous cases in the book are based on real analogs. Just check out this one via Overlawyered:

Katoria Lee refused a carjacker's command to surrender her car-keys in 2001, so
he shot her in the back. This, a Georgia state court jury decided, was the fault
of Wal-Mart, who owned the parking lot where the shooting occurred. Eric Deown
Riggins, 22, was caught within minutes, and is serving a 15-year sentence in
state prison for the crime.

Vioxx Update

Ted Frank has this update on Vioxx litigation, and it couldn't possibly be more depressing:

Take, for example, the last
case Merck lost, that of Leonel Garza in south Texas. Mr. Garza, who
was said by plaintiffs to have taken Vioxx for three weeks, was a
71-year-old overweight smoker, with high cholesterol, decades of heart
disease, and a history of a heart attack and a quadruple bypass, yet a
jury awarded his survivors $7 million in "compensatory" damages, and
punitive damages to boot

He goes on to recount the very reasonable suspicion that Garza may not have even taken Vioxx at all, as he never had a prescription and his doctor has denied that he passed Garza a series of free samples in little brown bottles.

So out of eleven cases that
have gone to trial or almost gone to trial, there is a reasonable
suspicion that plaintiffs faked Vioxx usage in as many as five of them.
How many more of the tens of thousands of pending plaintiffs have
similar flaws?

He concludes with this excellent point:

Perhaps appellate courts
will get around to correcting these travesties, but the plaintiffs' bar
is counting on enough bad verdicts to slip through the cracks to make
these cases profitable.

The equation of expected returns is certainly helped by the fact
that no one is even suggesting that presenting this sort of
questionable evidence is unethical, much less illegal. Drug safety is
important, but so are the health costs from vaccines and drugs not
marketed because of liability risks. If the judicial system cannot
police itself adequately, the question then becomes why we want to
entrust national drug safety policy to an elected judge and a handful
of randomly selected jurors in Starr County, Texas?

Props to Merck for fighting each and every case so far and resisting the mass tort pressure to start offering settlements to anyone who asks for one.

Bathroom Liability?

I was in the Peoples Republic of Santa Monica this weekend. Yes, I'm glad I don't have to live there (but I paid $50 per night in hotel taxes -- wow!) but the beach is gorgeous and the weather usually good. We were shopping down the 3rd Avenue outdoor mall and were in a fairly large (3 story) Borders Books store when we found there was no bathrooms for customers. The manager told us that it was for liability reasons.

Liability? Has it really gotten this bad, or is this just becoming the convenient excuse nowadays when any public service is not offered? I did a search and found that Santa Monica is ruthless in going after ADA access issues, so my guess is that they could not bring their bathroom into compliance in this older building for the 0.1% of customers who were handicapped so they closed it for the other 99.9%. My other guess is that it might have something to do with the huge homeless population in Santa Monica, perhaps with them having trouble barring access to them (the public restroom we finally found had a homeless man camped out in it).

The most interesting piece is where they compare malpractice awards to results of the independent medical review board rulings.

Our test finds that the tort system and review system do not correlate. Figure Five shows that
adverse actions per doctor in the medical review board system do not correlate with the number of medical malpractice cases per doctor in the tort system, nor do they correlate with the
average award per doctor....

In no case is the correlation large; in some
cases, it is actually slightly negative. What these results indicate is that the two systems
we have for determining malpractice, the tort
system and the medical review system, result
in very different determinations of malpractice.
Surely, one of them is wrong!

The conclusion is one I think many neutral parties have suspected for quite a while: The tort system is doubly broken: Bad outcomes that truly are the result of malpractice often do not result in an award, while numerous tort awards go to people who are not the victim of any real malpractice. Or to put it simply, people who are owed restitution aren't getting it and people who get money often shouldn't be owed anything.

The obvious result is a gross miscarriage of justice. However, there is a second, less talked about result: If the tort system is random, having no correlation to real doctor error or doctor quality, then it is impossible to charge doctors with risk-adjusted premiums. In an efficient market, the worst doctors would pay the highest premiums and would get driven out of the market, just like bad drivers must change their behavior or face lifelong high auto premiums. However, if tort awards are not correlated with bad behavior, as the study implies, then the system creates a huge moral hazard, with bad doctors underpaying for insurance and good doctors overpaying. The result is that at best, good doctors will be driven out of the system at least as frequently as bad doctors. At worst, good doctors, frustrated by the lack of justice in the system, will actually be more likely to leave the system than bad doctors.

So I am happy that this particular rock is finally being turned over. However, there are substantial problems on the prosecution side of this as well. The Justice department is using the abusive Thompson Memo guidelines to go after Milberg-Weiss. Larry Ribstein is concerned with the firm death penalty approach being taken here that was used to bring down Arthur Anderson.

Milberg is a different story. The case seems to be based on the
alleged misconduct of a couple of partners. If the partners did what
they are accused of, they should go down. Moreover, the firm will have
earned fees under questionable circumstances and should bear civil
consequences for that. But the criminal indictment casts a shadow on
the entire firm that it will have a hard time surviving, given the need
to establish its credibility for courts and institutional investors in
the highly competitive class action industry. Moreover, unlike AA, it’s
not clear the indictment reveals a continuing public policy problem,
given the post-PSLRA reliance on unbribable plaintiffs.

We (and I) may not like Milberg’s business. But the class action
part of it was one enabled by legal rules. The right way to deal with
the problems of this business is to change the rules, as I’ve argued
for securities class actions in my Fraud on a Noisy Market.
When we criminally condemn firms like Milberg because we don't like
their business, we set a precedent for other firms in controversial
lines of work -- e.g., Drexel Burnham.

More seriously, the power to criminalize a firm puts a potent tool
in the government’s hands to get the firm to cooperate in sacrificing
the rights of criminal defendants. Here the cure seems patently worse
the disease. The questions are no less in Milberg than in KPMG just
because Milberg was in an unpopular line of work.

The government tactic de jour, as outlined in the Thompson memo, is to threaten a large company with extinction, telling them they might get off the hook but only if they agree to throw a number of their employees to the wolves. These steps include the unbelievable step of forcing companies to waive attorney client privilege, including privilege between any company-paid attorney and any employee. Does anyone doubt that if the company who employs you was given the choice of having the government prosecute them or you, who they would choose? In this context, Arthur Anderson should be commended for not sacrificing its employees for its own survival. KPMG survived, because it chose to roll over on its employees. I commented on many of the problems with the AA takedown here, and on the dangers of the Thompson Memo here and here. Tom Kirkendall is all over the story.

Police said Laura Lee Medley, who repeatedly filed claims and lawsuits
for noncompliance with the Americans with Disabilities Act, was a con
artist.

A San Bernardino County spokesman, David Wert, said
Medley had complained to police earlier that she was having medical
problems so she was taken to a hospital for treatment.

Wert said, "That's where the great miracle occurred."

Officers
said Medley, 35, leaped from her wheelchair and ran for freedom after
being placed under arrest by Las Vegas police. The barefoot woman was
caught after a brief pursuit.

According to authorities in
Southern California, Medley was never disabled but used her supposed
condition to file many medical claims and lawsuits. Her questionable
claims led to the arrest in Las Vegas.

The vast majority of my employees and many of my customers are over 60, so we try extra-hard to accommodate people with all kinds of disabilities. That is why this type of fraud really burns me up. Not once but twice we have killed incipient lawsuits when we have had customers who were claiming severe physical disabilities observed playing football or unloading a truck. I have had one person I was interviewing for a job tell me that I had to hire him since he was disabled, because if I didn't choose him I would be discriminating against the handicapped (we chose a different candidate).

A Los Angeles psychologist who was denied a tote bag during a Mother's
Day giveaway at an Angel game is suing the baseball team, alleging sex
and age discrimination.

Michael Cohn's class-action claim in Orange County Superior Court
alleges that thousands of males and fans under 18 were "treated
unequally" at a "Family Sunday" promotion last May and are entitled to
$4,000 each in damages.

Vioxx and Merck Lose Again

Vioxx went to 3 for 6 in jury verdicts today as Merck lost a case in Texas (WSJ $). Merck got hit with $7 million in damages plus $25 million in punitive damages, presumably since Merck was so clearly at fault as to be considered to have acted recklessly. With that in mind, consider a couple of facts in the case: First, the plaintiff..

died of a heart attack after taking Vioxx for less than a month.

I know what you are thinking. How, after less than a month of use (and maybe as little as a week), could any plaintiff prove their heart attack was from Vioxx? I mean, out of the thousands of people who took Vioxx, some statistically were due for a heart attack even had they not taken the drug. Having one event (the heart attack) follow another (Vioxx use) does not prove causation, after all. I guess the jury decided that this guy was not at risk for a heart attack otherwise. Of course, they admitted that:

Mr. Garza, a Vietnam veteran who was 71 years old when he died in 2001,
had a history of smoking, had suffered a prior heart attack in 1981 and
had quadruple bypass surgery in 1985.

But I'm sure that had no bearing on his heart attack. It must have been from the week of Vioxx. His lawyers mitigated this by arguing:

he had a stress test shortly before his heart attack that showed he was in good health

Do you know how many men die of heart attacks within months of having a clean stress test? A lot.

Damages and Double Jeopardy

I saw the other day that Merck lost another Vioxx trial, with the jury awarding $4.5 million to a man who had a heart attack after taking Vioxx. I won't get into my problems with this type of litigation today, but I did in many other posts like this one (and this and this).

My question today revolves around the fact that this trial is now going into the punitive damages phase, where the jury will decide if Merck owes more money as a punishment not narrowly for this man's heart attack (for which they are paying $4.5 million) but more generally for Merck's actions in bringing the drug to market at all.

Here's the problem: A jury in Texas already hit Merck with $259 million in punitive damages*. This number was based on a lot of testimony about Merck's sales and profits from Vioxx, so it was presumably aimed at punishing Merck for "errors" in their whole Vioxx program. So if that is the case, how can Merck end up facing a jury again coming up with a separate punitive damage award for the same "crime"? Sure, it makes sense that Merck can owe actual damages to individual claimants in trial after trial. But how can they owe punitive damages for the whole Vioxx program over and over again? Aren't they being punished over and over for the same misdeed, violating their Constitutional protection against double jeopardy?

I'm not sure what the solution is. One approach, of course, would be to say that punitive damages can only be awarded once, which would effectively mean they would go to the first plaintiff to win his case. I am not sure this makes a lot of sense from a public policy point of view, but it would be highly entertaining to watch tort lawyers knocking themselves over and maneuvering to be the first verdict, knowing that if they are first,they would get 30% of hundreds of millions of dollars but if they are second they get 30% of much much less, since punitive damages are always far larger than actual damages.

*Under Texas law, this amount will likely be reduced, but it doesn't change the fact of double jeopardy

Lawyer Tax on Workers Comp in Florida

First, a little background as I understand workers comp: Years ago, government, workers and employers effectively made a deal that has worked pretty well for everyone. In that deal, workers gave up the right to sue for workplace injuries in exchange for a program where employers were required to contribute to a workers comp fund and employees are paid by a government bureaucracy for their health care and lost time. The system is "no-fault" to the extent that it does not matter if the worker is hurt because the employer had unsafe conditions or if the worker is hurt because he did something boneheaded in violation of rules - either way he gets paid the same. The system avoids moral hazard at least on the employers side by charging higher premiums to employers that have higher claims rates (based on an experience mod system explained here). Employee moral hazard (ie cheating) is supposed to be policed by the bureaucracy, and one can evaluate how much cheating is going on by how high the rates in the state are. California used to have very high rates and lots of cheating, but has cracked down of late and things are better. Florida is the king of workers comp fraud and employee cheating, so much so that many national insurers won't touch Florida and our rates are twice as high (or more) in Florida than in other states.

Already frustrated with Florida over the high amount of cheating and high rates, two things I have seen here of late make me doubly depressed. First, in the last year or so we have started to see claims paid where in addition to, say, $20,000 in actual compensation to a worker, there is an equal amount paid to lawyers. The first time, I was irate. Why are my workers comp dollars going to lawyers? The whole point of the workers comp system is to substitute an administrative no-fault claims system for expensive lawyers and trials.

So this week I get my second surprise about Florida workers comp. I am down in Florida, doing some business as well as visiting the in-laws (which is why blogging has been light) when I start to hear radio commercials by law firms that say "If you have been hurt at work, call us first before you claim workers comp." The message is not even, "call us if you think the administrative decision was unfair" but was "get us involved with every little claim." Does this mean that I am going to start seeing a lawyer 'tax' on every workers comp claim in Florida? If so, Floridians must have passed some pretty dumb legislation somewhere along the way. Now, I might understand this if this was a worker backlash in some state that administratively is over-tough on workers in filing their claims, but Florida has historically been the most generous already. I am sure most of the employers in this state have experienced the "debilitating injury the day before I was going to quit," a tried and true Florida technique for supplementing unemployment insurance for a bit of paid vacation.

Maybe some of the readers can confirm if Florida did something new legislatively over the past few years that opened this up. By the way, and I apologize in advance to all my hard-working readers in Florida, but I don't think there is any other state with a larger population of searching-for-something-for-nothing freeloaders than one can find in Florida. Something culturally seems to be wrong here, and I wonder if Florida might not be the next California, with businesses heading for the exits.

Lawsuit Perpetual Motion Machine

A guy in Lodi, California seems to have discovered the lawsuit-equivalent of perpetual motion by suing himself (via Overlawyered)

When a dump truck backed into Curtis Gokey's car, he decided to sue the
city for damages. Only thing is, he was the one driving the dump truck.
But that minor detail didn't stop Gokey, a Lodi city employee, from
filing a $3,600 claim for the December accident, even after admitting
the crash was his fault.

Wow, up to this point, you needed an accomplice for this kind of thing, but now you can just do it yourself -- hop in the company car, run it into your house (or maybe the wife and kids for a really big payday) and sue the company. Genius.

Sued for Taking a Bath

Not Marvin and Goldie Smith, who have sued their neighbor over her 5 a.m. baths.

The
couple, 83 and 78 respectively, live on the eighth floor of the Polo
Club Condominiums near the Cherry Creek Shopping Center. They claim the
water pipes they share with the woman below them vibrate so badly they
can't sleep through her early morning baths....

So the Smiths called their son, Sheldon, a
partner in the Holland and Hart law firm. He sent a letter, threatening
Peterson that her "intransigence ... and tortuous conduct have resulted
in incredible sleep deprivation for Mr. and Mrs. Smith. Your obstinacy
has ruled the day. That will now cease."

He then ordered Peterson to stop running water in her bathtub before 8 a.m....The Smiths sued Peterson just before Christmas, citing the "reckless and negligent use of her bathtub."

Horrible Verdict

In what we may look back on as one of the worst and most destructive jury verdicts of the decade, three paint makers were found guilty of selling lead paint back when it was, well, legal:

A Rhode Island jury today found Sherwin-Williams Co. and two other
paintmakers guilty of creating a 'public nuisance' by manufacturing
lead paint after it was found to be dangerous." If upheld, the verdict
will force the companies to contribute millions toward abatement of
existing paint; a judge will also consider demands for punitive
damages. The ruling, the first of its kind, is also expected to
encourage the filing of more suits against the industry

As Walter Olson points out, the suit was dreamed up by veteran law firms from tobacco and asbestos lawsuits, using bits of both litigation models:

The verdict is an unfortunate confirmation that the "tobacco model" of
mass tort litigation remains alive and well. In particular,
contingency-fee private counsel have once again managed to 1) dream up
a novel idea for litigation based on the idea that some category of
public expenditure is really blameable on long-ago sales of a product;
2) sell the idea of suing to public officials who agree to front the
action, and who thus provide (along with advocacy groups) a suitably
public face for the lawsuit; and 3) manage to get liability attributed
retroactively to businesses whose actions decades ago were plainly
lawful under the standards of that time.

There are so many screwy aspects to this case that
it's hard to know where to begin. The jurors heard no evidence about an
injured party, nor were they informed of any specific house or building
that constituted the "nuisance." As for the defendants, Judge Michael
Silverstein instructed the jury that it wasn't necessary to find that
Sherwin-Williams, NL Industries and Millennium Holdings had actually
manufactured the paint present in Rhode Island or that they had even
sold it there.

Oh, and did we mention that at the time the companies
may or may not have sold lead paint in Rhode Island it was an entirely
lawful product? "The fact that the conduct that caused the nuisance is
lawful does not preclude liability," Judge Silverstein said. Lead paint
was banned for residential use in 1978.

So why is this such a big deal? One only has to look at the situation in asbestos to see the potential ramifications. The asbestos mess began, sensibly enough I guess, with lawyers suing makers and heavy users of asbestos products into bankruptcy for the benefit of people seriously ill (though one can argue that most of these cases belonged in the workers comp. system, but workers comp. doesn't allow those juicy punitive damage payments that pay the fuel bills for the lawyers' Gulfstream V's). Eventually, the asbestos mass tort morphed into lawyers suing any company with deep pockets that had even heard of the word asbestos for the benefit of tens of thousands of people who had never been harmed but only claimed to have been present in the same zip code as asbestos.

Here is the problem with the potential lead paint mass tort: It has skipped right to the asbestos end-game, bypassing the "helping people who were seriously harmed" stage and jumping right to the settlements for billions without proof of any related injury. And for all the ubiquity of asbestos, lead paint was even more prevalent in its day. Will Sears be bankrupted for selling lead paint? Will auto-makers and homebuilders be bankrupted for using it? And, separately, will any of the settlement money that flows to states really go to lead paint abatement, or will most go to general revenue, as it did with tobacco?

OK, so its clear why those of use who care about stuff like property rights and individual responsibility might be appalled at this decision, but you progressive public policy types should be appalled as well. If this thing gets rolling, the country will end up diverting hundreds of billions of dollars to a problem, mainly childhood lead poisoning, that while not solved has really been greatly reduced over the past few years. Just to get a sense of scale, for example, we are talking about far more money potentially focused on lead paint than the total spent today publicly and privately on AIDS and cancer research combined. Totally insane.

Stanford law professor Joseph Grundfest, a former
SEC commissioner, goes so far as to describe the current system governing
securities fraud as "nuts." As he sees it, class-action settlements amount
to nothing more than an unproductive "transfer payment" from current shareholders
to past shareholders--with big contingency fees skimmed off the top. "The
plaintiffs lawyers are getting a cut of the money that flows from our left
pocket to our right pocket," he says. Even in those cases involving genuine
wrongdoing, he adds, the individual perpetrators rarely pay anything out
of their own pockets, thanks to insurance and indemnification policies.
Nor do the shareholders get much--generally no more than 15% of their losses,
studies show. "Fraud is wrong," says Grundfest. "It has to be punished.
But what we have here is a shell game."

Read the whole article. In many of the anecdotes, Lerach seems to be channeling Tony Soprano.

By the way, let me digress just one second on the nature of my blogging. When I said above that it was a theory I started to develop in a post, this does not mean that I sat around for days, came up with the idea, and started to flesh out my well-oiled thinking on the topic in that post. It means it occurred to me literally while I was typing my post, somewhere between paragraphs 3 and 4. I use the act of blogging as a way to test-drive my thinking on certain topics, which puts you the reader in the position of something between a intellectual sounding board and a psychotherapist. I actually spend my time trying to keep my business running -- my college roommate is the only one I know who gets paid to sit around and think deep thoughts.

Anyway, with that out of the way, I can return to the actual point of this post which is to point out that the same attitude of "not to know it is to love it" may well apply to torts and litigation. All romantic and heroic as portrayed in the media (e.g. Erin Bronkovitch), torts as practiced in real-life seldom so heroic, either in their details or their outcomes. Here is Bookslut wondering about her opposition to tort reform now that she has witnessed some silly lawsuits in her area of familiarity. Overlawyered has background on the case in question/

"A Vancouver woman is suing the city and the B.C. government for
allegedly failing to keep the streets safe after her pet cat was killed
by two coyotes....In a statement of claim filed in B.C. Supreme Court,
[Judith] Webster says she's suffered and continues to suffer from
post-traumatic stress and/or adjustment disorder, loss of enjoyment of
life, and loss of past and future earnings."

Arizona has gotten a lot of press for its shoot to kill order on wild animals in inhabited areas, engendered by a similar suit against the state. Environmentalists have made common cause successfully for years with the tort bar, but one wonders if these kinds of suits may drive a wedge between them.

By the way, did anyone see that guy in Pittsburg who had a heart attack in a bar when Jerome Bettis fumbled the ball late in the 4th quarter against Indy? I wonder if he will be suing the Steelers for "post-traumatic stress and/or adjustment disorder, loss of enjoyment of
life, and loss of past and future earnings"?

“Last summer, [New
York City’s] health department launched a campaign against trans-fats.
Often used by restaurants and in packaged foods, trans-fats are thought
to cause cholesterol problems and increase the risk of heart disease.
After restaurant inspectors found that 30 percent of the city's 30,000
eateries were using oils that contain trans-fats, the department began
urging a citywide ''oil change.'' Officials sent letters to food
service operators and started teaching workers about trans-fats along
with their required food safety training. The city plans another survey
this spring to measure the results of the project. Officials next want
to tackle portion sizes. Towering pastrami sandwiches, bagels with
gooey schmears of cream cheese and pizza slices that spill over paper
plates may be the city's culinary landmarks, but the health department
says the Big Apple is out of control.”

Which makes the NYC health department officials the only New Yorkers I have ever heard complain about getting too much for their money.

Jury Kills Vioxx. Penicillin Next?

The other day, I wrote about the left of late lamenting that the machinery of state control that they created, agencies like the FDA and public schools, are being taken over by their political enemies, the "Neanderthal southern religious conservatives". I observed that they were not apologizing for creating a statist structure to control individual decision-making, but just were upset they lost control of it.

Today I was pointed to this article by Derek Lowe who has been a drug development researcher for a number of years:

As a drug discovery researcher, I can tell you something that might sound
crazy: many of these older drugs would have a hard time getting approved today.
Some of them would never even have made it to the FDA at all.

The best example is aspirin itself. It's one of the foundation stones of the
drug industry, and it's hard to even guess how many billions of doses of it have
been taken over the last hundred years. But if you were somehow able to change
history so that aspirin had never been discovered until this year, I can
guarantee you that it would have died in the lab. No modern drug development
organization would touch it.

Thanks in part to advertisements for competing drugs, people know that there
are some stomach problems associated with aspirin. Actually, its use more or
less doubles the risk of a severe gastrointestinal event, which in most cases
means bleeding seriously enough to require hospitalization. Lower doses such as
those prescribed for cardiovascular patients and various formulation
improvements (coatings and the like) only seem to improve these numbers by a
small amount. Such incidents, along with others brought on by other oral
anti-inflammatory drugs, are the most common severe drug side effects seen in
medical practice....

That brings us up to penicillin, a drug with a clean reputation if ever there
was one. But at the same time, everyone has heard of the occasional bad allergic
reaction to it and related antibiotics. Even with the availability of skin tests
for sensitivity, these antibiotics cause about one fatality per 50 to 100,000
patient courses of treatment. Other severe reactions are twenty times as common.
Those are interesting figures to put into today's legal context: over 9 million
prescriptions were written for Vioxx, for example. Any modern drug that directly
caused that number of patient deaths and injuries would bury its company in a
hailstorm of lawsuits, because (unlike the Vioxx cases) there would be little
room to argue about

She Was Asking For It

While the "she was asking for it" defense has thankfully been purged from most rape trials (at least those involving strangers), it seems to be alive and well in the civil trial world. Last week, a jury held that the terrorists who bombed the World Trade Center in 1993 were only 32% responsible for their actions. The real villain in this terrorist attack was ... the Port Authority, owner of the facility, who so thoughtlessly allowed themselves to get bombed. More via Volokh and Overlawyered. Based on joint and several liability, the PA now is on the hook for the entire $1.8 billion verdict.

By the way, the "smoking gun" in the trial was apparently a recommendation the PA received (one of hundreds and perhaps thousands of suggestions of wildly varying quality) to close the parking lot to cars to prevent car bombs. This helps reinforce my earlier point of why litigation insanity like this actually works to make the world less safe, because such litigation provides a strong disincentive for an entity to have any internal discourse on safety, since notes from this discourse can be held against it later.

It is always useful to think about what consistently applied policy would have satisfied the jury that the PA was not liable. In this case, the jury's verdict was clearly "they should have closed the garage to prevent car bombings." Now, lets apply that everywhere consistently. This would basically mean that we close every car parking garage in the country, since they are all equally vulnerable to a car bomb. Applying this further, wouldn't this same standard also result in closing all tall buildings to prevent airplane attack, closing all airports to prevent hijackings, and closing all government buildings to prevent bombings (well, maybe thats not so bad). I have posted before about finding the absurdity from translating a jury's civil verdict into a consistent policy. Here is one example:

the exact wording on the complaint against the railroad is even better than I thought:

"The
[engineer] did not stop the train in a timely manner, and failed to
yield the right of way to a pedestrian walking along the tracks in
plain view"

that
the railroad was negligent for failing to post signs warning 'of the
dangers of walking near train tracks and that the tracks were actively
in useLets

leave aside the obvious point
about individual responsibility, and ask what would happen if this were
the legal standard, to have such signs. To make sure someone saw one,
you would have to have one say every 30 feet. Since there are just over 200,000 miles of freight railroads in the North America that works out to a bit over 35,000,000 signs that need to be posted. At $100 per sign this would cost $3.5 billion.

Here is the serious point: Never would any legislature
pass a law that said there had to be warning signs every 30 feet on
railroads. It would be way too costly for little benefit. At grade
crossings today, we have signs and flashing lights and even gates and
still thousands of people a year drive in front of trains on grade
crossings. So, if we would never require it legislatively, how have we
gotten to a point where a jury might effectively retroactively require
such signs, and assess a multi-million dollar penalty for not doing it?

More on California Bounty Hunting

contains a sneaky, little-discussed provision that will empower trial
lawyers to file bounty-hunting suits against pharmaceutical companies
if the companies charge prices "that lead to any unjust and
unreasonable profit", with a minimum $100,000 plus fees guaranteed to
plaintiffs if a jury agrees that they have proved this (very hazily
defined) offense.

He has a roundup of posts on other California bounty-hunting laws. I knew about a few of these, but the list is a lot longer than I suspected.

Is There a Minimum Income Necesary to be Responsible?

There is an interesting discussion about liability going on at Overlawyered and Prawfsblawg. The original subject was Eddy Curry, the basketball player who may or may not have a genetic heart condition. The Chicago Bulls refused to play him until he had submitted to a series of tests that would let them determine for themselves if it was safe for him to play (Curry had already said that he wanted to play).

The Bulls have been derided in a number of venues for requiring privacy-invading tests which Curry reasonably refused to submit to. However, in today's legal world, the Bulls are being entirely rational and in fact entirely consistent with the law, at least as it is practiced in courts today. Many courts, including those in particular in legal hellhole Illinois, have pretty much thrown out most liability wavers. Effectively, courts have said that Curry has no right to make risk-reward trade-offs for his own body and self, and if he gets hurt playing for the Bulls, it is the Bulls fault and they can be sued. So, reasonably, the Bulls want the necessary information to make that safety decision, since the fact that Curry has already decided for himself holds no weight in courts today.

I have long lamented this statist tendency to treat us all like incompetent children, effectively revoking our ability to make decisions for ourselves and our own lives. Where the discussion gets interesting, though, is when a lawyer suggests that Curry's liability waiver should hold more water than the average person's, since he is wealthy and has access to a full range of professionals to advise him. Which suggests that there is some point, either in terms of wealth or education, where Americans may actually regain the right to make decisions for themselves and be held responsible for them. I remember when I was working on an acquisition of a company, and was concerned whether a non-compete agreement I had the other party sign was enforceable. After all, I had in the past had non-competes signed by my employees routinely thrown out by judges. My attorney told me that it is assumed that the average ordinary employee does not know what they are doing when they sign an agreement, but that wealthy business people in a transaction are treated like big boys and it is assumed they actually understand and really mean what they sign their name to.

Overlawyered concludes:

A fascinating epitomization of the litigation culture: "ordinary"
people can't make intelligent and free decisions, but elites—presumably
including lawyers and judges—can properly advise them how to do so.

Paul's proposed rule of emancipation upon reaching a certain wealth
level has interesting ramifications. It would be fascinating to see
what democratic political consensus would develop for where to set the
Gowder Line above which people are permitted to make free decisions.
Many doctors and attorneys would be sufficiently wealthy to qualify,
but would public interest and government attorneys protest that,
through no fault of their own, they don't have the same rights as
BigLaw partners and their children? Would college professors lobby for
the same emancipation rights as wealthy millionaires because they're
already sufficiently sophisticated? And once that happens, would the
NEA dare to suggest that teachers aren't entitled to the same status?
Before you know it, every Sneech will have a star on his belly.

Update: By the way, we discuss this all in terms of capability and competence and knowledge. One important factor not discussed above is that every person has a different set of values. Mr. Curry may rank the value of playing basketball, or making lots of money, higher than the risk of losing his full four-score and ten year lifespan. Or he might feel just the opposite. I have heard athletes who have said they would have played pro sports even if they knew for sure they would only as a result live until 50, and I have heard athletes call those others insane. We all have different values, and even beyond relative confidence and information in making decisions, it is IMPOSSIBLE for other people to make quality decisions about your life, because they are not going to share the details of what you value and how much. But of course they do all the time. And if we assign others liability when we make the wrong choice in our life, then we are just asking for other people to take over our decision-making.

In a free society, I suppose you can delegate the decision-making for your life to others, if you lack confidence in your abilities, but don't give away mine!

We've reported before (Mar. 18, 2004)
on how, after court decisions in Arizona eroded the state's
longstanding immunity from being sued over the actions of wild animals,
lawyers began obtaining large verdicts from public managers over
humans' harmful encounters with wildlife -- with the result that
managers began moving to a "when in doubt, take it [out]" policy of
slaughtering wild creatures that might pose even a remote threat to
people. The continuing results of the policy came in for some public
discussion last month after a bear wandered into a residential area
near Rumsey Park in Payson, Ariz. and was euthanized by Arizona Game
and Fish personnel:

[Ranger Cathe] Descheemaker said
that the two Game and Fish officials were no doubt following procedure,
and that bears are routinely destroyed ever since the agency was sued
when a bear mauled a 16-year-old girl in 1996 on Mt. Lemmon near
Tucson.

"Since Game and Fish lost that lawsuit, they do not relocate any
bears," she said. "The fact that bear was in town was its death
warrant."

Lawyers Revive the Badger Game

I missed this story the first time around, but apparently a husband and wife team of lawyers has revived the old badger game, but in a more modern form:

According to a story in the San Antonio Express-News,
husband-and-wife legal partners Ted H. and Mary Schorlemer Roberts received
money in a curious sequence of events. Mary, claiming to seek "no strings"
discreet encounters, would seduce men over an Internet dating service. Ted would
then write the men (in legal documents sometimes typed by Mary) and notify them
that he planned to seek intrusive and public civil discovery to investigate
whether the affair brought forward potential causes of action that were flimsy
at best; the men would pay tens of thousands of dollars for a release and
confidentiality agreement.

Read the full Overlawyered update: it is fascinating to see just where watchdogs set the ethical bar for lawyers (hint: its really low). Apparently the Bar Association can't decide if they think this behavior by the Roberts is unethical. Currently the the attorney who blew the whistle on this scam is being investigated, but the scammers themselves are not under investigation.

.... How did we arrive at a system in which 12 random Texans are assigned
responsibility for evaluating the scientific merits of statistical evidence of
this type, weighing the costs and benefits, and potentially
sending a productive blue-chip American company into bankruptcy protection?

The Ever-Widening Search For Deep Pockets

I could fill this blog with litigation horror stories, but there is no need when Walter Olson does such a good job. If you read his blog much, one of the themes than runs through the cases he highlights is the ever widening search in every case to find the deep pockets. Unfortunately for trial lawyers, the person who is truly at fault, ie the drunk driver that runs down a pedestrian, seldom has deep enough pockets to produce a really satisfying fee. So you gotta be creative. This is to be expected. What is not to be expected is the lengths to which the judicial system goes to validate this search (via Overlawyered):

The state Supreme Court has ruled that store owners can be sued for causing
injuries in a drunken driving accident if they sold gas to an intoxicated
driver.

The court ruled in a lawsuit filed by two men who were severely
injured in 2000 when they were struck head-on by Brian Lee Tarver, who later
pleaded guilty to vehicular assault and driving under the influence.
Before the accident, Tarver bought gas at an Exxon owned by East
Tennessee Pioneer Oil Company.

Car veers into
truck's lane...and so a jury has ordered the trucking company, Auction
Transport Inc., to pay $22.5 million over the resulting injuries to a
young passenger in the accident, which occurred at rush hour on Kansas
City's I-435. Mary Coleman's car, allegedly sideswiped by a third
vehicle, had careened in front of the truck, but attorneys argued that
the truck driver had been "driving too fast in congested traffic and
not watching the road." The jury found the trucking company responsible
for just less than half the fault of the accident -- a greater share of
fault than the allegedly sideswiping driver -- and Coleman for hardly
any of it.

So, surprisingly enough, three
vehicles involved, two with limited resources and one with deep
pockets. Guess who is liable - the deep pockets of course, despite the
fact that he was the only driver among the three who stayed in his lane!

Now, here is the thought experiment. Move the truck with
deep pockets into any of the other two roles. Imagine first that it
was the car that nudged the plaintiff into the other lane. Imagine
next that the truck was the one nudged into oncoming traffic and hit
the plaintiff. In these two cases, if they had gone to trial, who
would have gotten the blame? I would bet you that in either case, the
truck with the deep pockets would have been given most of the blame in
either of these cases.

So where is the fairness? Why should blame be based on
bank account size, and not actual actions? Is there anything more than
coercive wealth transfer going on here? Does this constitute justice?

The U.S. Supreme Court recently found that the city's original seizure of
private property was constitutional under the principal of eminent domain, and
now New London is claiming that the affected homeowners were living on city land
for the duration of the lawsuit and owe back rent. It's a new definition of
chutzpah: Confiscate land and charge back rent for the years the owners fought
confiscation.

In some cases, their debt could amount to hundreds of thousands of dollars.
Moreover, the homeowners are being offered buyouts based on the market rate as
it was in 2000...

The New London Development Corp., the semi-public organization hired by the
city to facilitate the deal, is offering residents the market rate as it was in
2000, as state law requires. That rate pales in comparison to what the units are
now worth, owing largely to the relentless housing bubble that has yet to burst.

"I can't replace what I have in this market for three times [the 2000
assessment]," says Dery, 48, who works as a home delivery sales manager for the New London Day . He soothes himself with humor:
"It's a lot like what I like to do in the stock market: buy high and sell low."

And there are more storms on the horizon. In June 2004, NLDC sent the seven
affected residents a letter indicating that after the completion of the case,
the city would expect to receive retroactive "use and occupancy" payments (also
known as "rent") from the residents.

In the letter, lawyers argued that because the takeover took place in 2000,
the residents had been living on city property for nearly five years, and would
therefore owe rent for the duration of their stay at the close of the trial. Any
money made from tenants, some residents' only form of income, would also have to be
paid to the city....

An NLDC estimate assessed Dery for $6,100 per month since the takeover, a
debt of more than $300K. One of his neighbors, case namesake Susette Kelo, who
owns a single-family house with her husband, learned she would owe in the
ballpark of 57 grand. "I'd leave here broke," says Kelo. "I wouldn't have a home
or any money to get one. I could probably get a large-size refrigerator box and
live under the bridge."

Renouncing My Place of Birth

I am renouncing my place of birth. No, not my country. For all its faults, I love the United States and miss it when I am away. And no, not my birth state of Texas, despite its perceived great Satan status among the media elite. I am not even renouncing my birth city of Houston, despite the fact I don't think I could ever return to the traffic and humidity. I am taking the bold, original step of renouncing my birth hospital. I was born at St. Luke's in the Texas Medical Center, and they are apparently going over to the dark side:

St. Luke's Episcopal Hospital's famed medical tower will soon be renamed for a
Houston lawyer who has made millions taking the health care industry to trial.

The plan to rename the edifice after John O'Quinn in recognition of a $25
million donation by his foundation has infuriated many St. Luke's doctors, who
last week began circulating a petition against it and Monday night convened an
emergency meeting of the medical executive committee.

"Perhaps you are unaware of the intensity of feelings held by many physicians
about Mr. John O'Quinn," says the petition, which is addressed to the Rev. Don
Wimberly, bishop of the Episcopal Diocese of Texas and chairman of the St.
Luke's Episcopal Health System board of directors. "The primary source of his
financial success has been representing plaintiffs in medical liability and
products liability cases, many of them groundless."

Where does the money come from? In part from O'Quinn's baseless but infuriatingly successful suits over breast implants, which no serious medical study have shown to be dangerous:

A plaintiff's lawyer who often has sued doctors, O'Quinn made some of his
fortune on litigation involving breast implants, which bankrupted a company (Dow
Corning) even though the consensus later developed that the science didn't back
up the claims.

Another part of the money comes from pushing bogus asbestos claims that have kept most of the asbestos settlement money out of the hands of the truly sick:

In July 2005, a Corpus Christi federal judge fined O'Quinn's law firm for its
part helping to produce what she called bogus diagnoses involving the
occupational illness silicosis, a serious and occasionally fatal lung disease.
She said the claims "defy all medical knowledge" and the diagnoses were about
"litigation rather than health care."

The guilty verdicts are in for L. Dennis Kozlowski and Mark H. Swartz. For Tyco International Ltd., the company they looted, there may be more court dates to come.

Tyco was hit with dozens of shareholder lawsuits in
2002 and 2003 as the company disclosed waves of accounting problems
that sank its stock. It has restated results several times, going as
far back as 1998. A July 2003 restatement cut about a billion dollars
from pretax profit over several years.

The convictions
lend credence to the plaintiffs' allegations that Tyco was grossly
mismanaged. The suing shareholders already have a strong leg to stand
on: Tyco's string of past restatements amount to an admission that its
accounting was deeply faulty. Shareholders claim they were deceived by
accounting practices that presented rosy pictures of the performance of
the company and its acquisitions, then suffered losses following the
revelation of allegations against Mr. Kozlowski and the restatements.

I have never been able to justify most lawsuits by shareholders against companies in which they own shares. Any successful verdict would effectively come out of the pockets of the company's owners who are.. the shareholders. So in effect, shareholders are suing themselves, and, win or lose, they as a group end up with less than if the suit had never been started, since a good chunk of the payout goes to the lawyers. The only way these suits make financial sense (except to the lawyers, like Bill Lerach) is if only a small subset of the shareholders participate, and then these are just vehicles for transferring money from half the shareholders to the other half, or in other words from one wronged party that does not engage in litigation to another wronged party who are aggressively litigious. Is there really justice here?

OK, you could argue that many of these shareholders are not suing themselves, because they are past shareholders that dumped their stock at a loss. But given these facts, these suits are even less fair. If these suits are often made by past shareholders who held stock at the time certain wrongs were committed, they are paid by current and future shareholders, who may well have not even owned the company at the time of the abuses, and may in fact be participating in cleaning the company up. So their argument is that because the company was run unethically when I owned it, I am going to sue the people who bought it from me and cleaned it up for my damages? Though it never happens, the more fair approach would be for current shareholders to sue past shareholders for the mess they left.

The vast majority of these suits are dreamed up by attorneys for the benefit of attorneys. They help shareholders not at all.

Postscript: There are a couple of circumstances where these suits are entirely justified. The two that come to mind are:

Suing a particular group of shareholders who somehow got disproportionate rights in the company or disproportionately benefited financially at the expense of other common shareholders. A good example would be suing the Rigas family at Adelphia Communications for hosing the minority shareholders. Note, however, I am talking not about suing the company, but suing certain owners who abused minority shareholders to their benefit.

Suing to modify certain governance rules that are seen to be unethical or illegal. I would hope this would be a last resort after trying a number of proxy fights and other remedies, but this can in certain circumstances be the last protection of minority shareholders abused by the majority.

Warning Sign Liability

This is something our company has encountered a couple of times now: There is apparently danger nowadays in posting warning signs. Apparently, courts and juries are taking the position that by posting any warning at all, you are communicating to the public that you are taking on the task of warning them about any possible danger. Then, when someone gets hurt by something you did not warn them about, they can argue that you are liable. Via Overlawyered:

Putting up signs warning visitors of the dangerous rip currents off New Jersey's
Long Beach might seem like an obvious step. "However, Long Beach Township
Attorney Richard Shackleton said there are liability issues to consider.
According to the law, the town does not have to warn people about natural
conditions, and if Long Beach put up a sign and a jury found its warnings to be
inadequate, the town could possibly be found liable for a drowning or injury.
Having no signs, he said, reduces the risk of being sued."

We have similarly had our attorneys and/or insurance inspectors recommend we take down a number of warning signs for this reason. I have no idea how this outcome can be in the public interest.

Walmart Litigation How-To

Like a smoker trying to quit for the twenty-seventh time, I have tried really, really hard to limit the number tort-related rants in my blog lately. I sometimes go for weeks without falling off the wagon,and then something comes along that is so insane, I can't resist.

This is only a very short sample of the whole list. I especially like the packaged product on floor. Get your friend to drop a box of Wheaties on the floor, and then you follow him and sue. And how the heck is Wal-Mart at fault if you overload your own shopping cart? Anyway, I am going to order one to see what I get.

By the way, I especially liked this whopper, I guess because he is trying to portray himself as the brave man taking on huge odds:

Most lawyers are not interested in filing suits against Wal-Mart.
The company is reluctant to settle cases promptly and fairly and almost
seems eager to take cases to trial. One of the goals of the Wal-Mart Litigation
Project is to identify lawyers who are ready, willing and able to sue the
company where a case has merit.

I hardly know where to start. First, if lawyers are so reluctant to sue Wal-Mart, why does Wal-Mart have like 20,000 suits pending against it? (note the numbers in this article, and it is 4 years old) Second, you gotta love the part about the attorney put out because Wal-Mart won't play the part of the victim like other companies and actually demands their right to a trial. In this one statement, you see exactly how the plaintiff's bar works - they don't really want to go to a trial. They want to force a fast settlement that requires little of their own time and move on with their 30+% of the take.

More Nutty Tort Decisions

Frequent readers of this site will know that I am a strong opponent of how the current tort system works. However, I am not a big supporter of damage caps. Damage caps may limit the harm of a broken tort system, but they don't fix the root problem - the jackpot justice that seeks wealth transfers from wealthy parties irrespective of who was really at fault. For example, note this case, where teens who were not wearing their seat belts were killed by a driver breaking the speed limit and with a blood alcohol level over twice the legal limit. The jury decided the accident was 90% the fault of... Ford, for designing a car with the same glass used by everyone else in the auto industry. But the unfairness of the decision is only the beginning of the outright nuttiness and fraud by the plaintiff in this case. Make sure to go to this article - you have to scroll to the article on Ford appealing frontier justice, but the extra finger work is justified.

Merck would seem to have one big thing in its favor: the company voluntarily withdrew Vioxx from the market. But while Merck executives may have hoped to persuade people that they were acting responsibly, plaintiffs’ attorneys have taken the withdrawal as an admission of guilt...internal company documents show that Merck employees were debating the safety of the drug for years before the recall.

From a scientific perspective, this is hardly damning. The internal debates about the drug’s safety were just that—debates, with different scientists arguing for and against the drug....While that kind of weighing of risk and benefit may be medically rational, in the legal arena it’s poison. Nothing infuriates juries like finding out that companies knew about dangers and then “balanced” them away. In fact, any kind of risk-benefit analysis, honest or not, is likely to get you in trouble with juries....Viscusi has shown that people are inclined to award heftier punitive damages against a company that had performed a risk analysis before selling a product than a company that didn’t bother to. Even if the company puts a very high value on each life, the fact that it has weighed costs against benefits is, in itself, reprehensible. “We’re just numbers, I feel, to them” is how a juror in the G.M. case put it. “Statistics. That’s something that is wrong.”...

Before a jury, then, a firm is better off being ignorant than informed.

Its a Chicken-Little World

Over the last two days, Phoenix put out an order to boil tap water before drinking and not to bathe or shower. Many restaurants closed for the two day period, and many many people went out and loaded up on expensive bottled water.

What I found interesting was that through the whole "crisis", and now after the fact, Phoenix officials continued to say that they thought the water was safe, that they had not gotten any bad test results, but that people still shouldn't use the water "as a precaution".

Given the current state of liability and torts, I probably would have done the same in their shoes, but is this really the world we want? There are costs to shutting off water in a city of 2 million plus people. Shouldn't those costs be justified by some real risk?

When I was an engineer, my job was often to rule on whether some condition was "safe". Every day I had to make decisions like "should we shut this part of the plant down, or can we keep running it safely". Certainly we wanted to err on the side of safety, but ruling every little concern as cause for shutdown would have caused the plant to be shut down almost all the time. In that job, I had to take responsibility and make a decision, balancing risks and costs. People want to say that shutting the plant (or the water system) at every hint of a problem is the "responsible" thing to do -- but in fact it is just the opposite. It is an avoidance, both of decision-making and responsibility.

Unfortunately, no one wants to make such decisions anymore. My wife's mammogram had something on it the doctor said he was 100% sure was just an artifact of the photography, but to cover his butt he said he had to get her to go have a biopsy (painful, expensive, and time-consuming) which was of course negative. We are loading the economy down with risk-defense costs, an invisible tax that is already hammering the medical field.

But beyond just the costs, at what point does this hair-trigger defensive posture lead to a chicken-little syndrome where no one pays attention to warnings any more? I know that the next time we get a warning about Phoenix water, I will be much less likely to be careful, because I remember that the last time nothing was really wrong with the water. How many people pay attention to homeland security alerts any more? Do you even bother to read warning labels any more, on the off chance it is a useful warning and not a "this toaster should not be used as a water ski" type warning?

This is Nuts Too

A former Inglewood police officer [Jeremy Morese] who was fired for punching a black teenager and slamming him against a patrol car was awarded $1.6 million Tuesday by the jury in a discrimination lawsuit he and his partner brought against the city [note that the teenager was handcuffed at the time]

OK, we won't even get into the fact that employers should be able to fire "at-will" employees for just about any old reason. How, though, have we gotten to a world where a police department can't fire an officer who abused a handcuffed man?

It gets better, though:

the jury was unanimous in awarding $810,000 to Morse's partner, Bijan Darvish, who had been disciplined in connection with the 2002 incident.

Darvish was suspended 10 days (presumably without pay) for falsifying a report to cover up for his partner's abusive actions. Ignore for a moment whether a 10 day suspension is the right punishment for his actions (I would have fired the guy), but ask - how is $810,000 proper recompense for a 10 day suspension, even if the suspension was totally invalid? The main damage was lost pay -- but on this basis the $810,000 for 10 days pay would represent $29,565,000 for a whole year. I guess I need to quit my job and go sign up as a police officer in Inglewood, because they sure as heck make more money than I do.

By the way, if I was an African-American, I would sure as hell stay away from Inglewood, or any other community that pays million dollar rewards to cops that beat the hell out of black people.

My Desire for Tort Reform Does Not Mean That I Deny Malpractice Exists

I have written a lot on my frustration with the tort system. If I had to summarize my issue in one sentence, it is that the system has moved away from assessing damages against parties truly guilty of substantial negligence or malpractice and has instead shifted to granting payouts to the injured, charging whoever happened to be nearby with deep pockets with the cost (see the tort thought experiment here).

The result in this current system is that the innocent at best get high insurance premiums and at worst have to fight for years against ridiculous suits. At the same time, the truly harmed fail to get compensation in a system clogged with BS claims, and the worst, truly bad doctors continue to practice.

But, as I said in the title, just because I am passionate about the tort system being broken does not mean that real damages aren't occurring. For example, this story via Kevin Drum about medical interns:

In New York City residents routinely begin their day at six or seven in the morning, work twelve hours, then stay on call all night. In a practice that I think is particularly cruel, they typically don't get home until noon the following day — several hours after morning rounds.

I have never, never understood why having interns practice medicine while sleep-deprived makes them better doctors. This is fraternity hazing, plain and simple (not to mention cost reduction for hospitals). I find it astounding that this practice still exists today, with the complexity that is modern medicine. Astonishingly, most doctors seem to support this practice. I find it even more astonishing that some smart attorney's haven't found a way to bring suit against hospitals for the plainly dangerous practice. It is a great example of what I said above about what is wrong with the system - OB's are getting sued every day for birth defects they had no power to correct or prevent, but hospitals get away with this clearly dangerous practice?

UPDATE:

Reason has more here. They make the interesting point that doctors support this hazing because it is a way to deter doctors from the field, in the same way as does occupational licensing, thus raising salaries.

A Quick Tort-Related Thought Experiment

Read this story at Overlawyered.com (you are welcome to try the linked article in the KC newspaper, but take my word for it, the registration is a pain with lots of attempted spamming (you might try bugmenot instead). Here is the gist:

Car veers into truck's lane...and so a jury has ordered the trucking company, Auction Transport Inc., to pay $22.5 million over the resulting injuries to a young passenger in the accident, which occurred at rush hour on Kansas City's I-435. Mary Coleman's car, allegedly sideswiped by a third vehicle, had careened in front of the truck, but attorneys argued that the truck driver had been "driving too fast in congested traffic and not watching the road." The jury found the trucking company responsible for just less than half the fault of the accident -- a greater share of fault than the allegedly sideswiping driver -- and Coleman for hardly any of it.

So, surprisingly enough, three vehicles involved, two with limited resources and one with deep pockets. Guess who is liable - the deep pockets of course, despite the fact that he was the only driver among the three who stayed in his lane!

Now, here is the thought experiment. Move the truck with deep pockets into any of the other two roles. Imagine first that it was the car that nudged the plaintiff into the other lane. Imagine next that the truck was the one nudged into oncoming traffic and hit the plaintiff. In these two cases, if they had gone to trial, who would have gotten the blame? I would bet you that in either case, the truck with the deep pockets would have been given most of the blame in either of these cases.

So where is the fairness? Why should blame be based on bank account size, and not actual actions? Is there anything more than coercive wealth transfer going on here? Does this constitute justice?

By the way, I continue to say that limiting damages misses the point of what is wrong with the tort system and the malpractice system. Congress and state legislatures have got to find a way to bring some sanity to the tort process, where legitimately harmed people can still get compensated for damages, however large those damages may be, but otherwise innocent people who happen to have deep pockets and somehow find themselves nearby a legitimate accident don't have to worry about being held at fault. Babies are sometimes born with birth defects, people sometimes slip on perfectly safe sidewalks, and car accidents are sometimes just that: accidents. I make this same point over and over here.

Lame Attack on Tort Reform

There are legitimate concerns that need to be addressed in putting together tort reform legislation; and there are shortcomings, as usual, in the GWB proposals (see below). This, however, via Kevin Drum, is grasping at straws by tort reform's opponents. Drum cites a recent UC San Diego Study described here that shows that there are a disproportionate number of medication errors in the first few days of the month. The study claims that this is due to pharmacists being overworked and making mistakes because they claim poor people all rush to buy their drugs after their government checks arrive.

Kevin Drum cites this study as evidence that malpractice tort reform is misguided, because, as he puts it "one of the causes of malpractice lawsuits is — surprise! — malpractice".

OK, its hard to know where to start. Though I am a supporter of tort reform, I would probably not have gotten worked up enough to bother to post. However, this is another example where science and "studies" are misunderstood and perverted in the media, which DOES tick me off enough to write. Here goes:

This study has nothing to do with medical malpractice! The debate is around doctors and doctors getting driven out of business by their malpractice rates. What do pharmacist mistakes have anything to do with the types of medical malpractice and medical malpractice insurance rates. The departure of doctors from certain counties has nothing to do with pharmacy errors.

Though the authors and Mr. Drum wish to imply that all the medication mistakes measured are by medical professionals, the study in fact includes:

“wrong drug given or taken,” or “accidental overdose of drug,” or “drug taken inadvertently.”

Note that of the four categories of mistakes above and included in the numbers (wrong drug given, wrong drug taken, accidental overdose, and drug taken inadvertently), three of the four are reasonably the fault of the individual taking the drug, not the pharmacist. However, since most supporters of the current tort system tend to reject the notion individual responsibility, I guess this little issue was ignored.

The authors never have anything to say about Mr. Drum's point, ie they do not correlate these deaths with actual malpractice suits, so it is impossible to actually make Mr. Drum's point in the first paragraph. The best evidence I have seen is equivocal - it says that a large number of lawsuits are baloney, but that a large number of true malpractice victims go uncompensated.

The authors actually have no evidence, other than their supposition, that these deaths are due to pharmacists being overworked. They did not do any research into the specific cases involved - they just surveyed notoriously inaccurate death certificates. In fact, though it may be in the actual report, I don't see any evidence that demand actually increases or that pharmacists are indeed overworked the first few days of the month - they just seem to hypothesize it without proof. And, if there really is more work load the first few days of the month, they never mention any data on staffing - presumably if there is such a trend, pharmacies may actually staff up for it, which would also defeat their supposition. My business gets more traffic on certain days of the year and we staff for it.

OK, while we are on the topic of medical tort reform, I will offer up a couple of more thoughts beyond just the silly use of this study:

No one denies that some malpractice torts are from real malpractice. Wrong legs ARE cut off, etc. No one wants to protect people who are guilty of obvious malpractice.

The issue is less with the existence of medical torts but with their enormous escalation in the last 10-20 years. To argue that malpractice torts mostly result from real malpractice, you have to argue that the incidence of real malpractice has gone up dramatically over the last 20 years. That may be, given the great increase in complexity of medicine, but I doubt it is the entire explanation

As usual, part of the problem in this argument is that GWB and his minions suck at getting a message out that can drive a consensus. Here is my alternate message on medical malpractice:

The system today is broken for two reasons:

First, bad doctors and real malpractice is not punished strongly enough, and some of the worst practitioners go on to hurt more and more people. Insurance today spreads the cost of bad medicine to all doctors, reducing the negative impact on the worst. In addition, insurance premiums and torts are a poor substitute for better discipline and penalty systems for bad medicine

Second, too many good doctors are punished with suits because they had bad outcomes from good medicine. Sometimes babies are born with birth defects, sometimes medications that help millions have unpredictably bad side effects for a few unlucky people, and sometimes people die and there is nothing that can be done.

More important than damage caps, both for truly injured patients and good doctors, is to bring scientific sanity to the system, and to make sure that bad medicine, not bad outcomes, are punished.

By the way, in a previous post Mr. Drum said that there is no cost to "frivolous" suits since they don't go to court. This is quite wrong:

I am not in medicine, but I am in a public contact business that gets some slip and fall suits, but I assure you that your insurance premiums can go up substantially even for suits that don't go to trial

You still have to have a lawyer at $400 or so an hour to defend against a frivolous suit. You can't walk in the first day and say, "hey judge, this is BS, let's drop it". I have spent tens of thousands of dollars before frivolous suits against me get dropped

Frivolous suits do go to trial and can win. Just think McDonald's coffee.

And yes, I have had experience with frivolous suits. In one case, a person who claims to have stepped on a nail head protruding from a board in our campground sued us for sexual dysfunction. That case is still active more than 3 years later! In another case, a person claimed to have hurt her knee falling on some steps. Excluding the issue of why I am at fault if she fell down a perfectly safe set of steps, we eventually discovered that she had hurt her knee several weeks earlier, had no medical insurance, and was visiting a number of local businesses making the same claim to try to get someone to pay for an operation.

So please, don't lecture me on frivolous suits. When Mr. Drum has to pay $400 an hour to defend a suit from someone who got an infected paper cut while reading his article in a magazine, then he can talk about why frivolous suits are OK. However, he is right in this respect - I don't think the answer is capping damages. The answer is having a way to defeat these things, to drop them out of the system quickly and inexpensively. To have some kind of sanity filter. This would help those of us subject to BS suits, and would help the truly injured get to trial faster.

Reaping What You Sow

This story surprises me not at all, and, if you are a reader of this site and my Florida horror stories, you will not be surprised that it occurred in Florida. After driving all the neurosurgeons out of town with frivolous malpractice suits, plaintiffs lawyers are now suing...because there are no neurosurgeons:

Florida, the family of the late Barbara Masterson is suing West Boca Medical Center because hospital staff was unable to locate a neurosurgeon willing to come to the scene to perform life-saving surgery after a stroke. "The incident occurred in February, when Palm Beach County neurosurgeons were refusing to perform emergency services for fear of skyrocketing malpractice costs."

Our family actually has a personal experience with this. My dad (81 years old) broke his neck while at his ranch in central Wyoming. As he was cared for in Casper, the largest city in the state, we soon found it impossible to get any quality time with the neurosurgeon, since there was only one left in all of the central part of the state! Eventually, they got his neck stabilized enough to fly him to Texas on a medical evac jet where he could get real care and eventually surgery (happy ending, all is well and all the appendages still work fine).

I Have a Better Idea

From Overlawyered.com comes the story that the anti-tort reform Center for Justice & Democracy is upset about this bit of legal immunity:

Many farmers use anhydrous ammonia as fertilizer, because it provides vital nitrogen nutrients to the soil. The combustible material is produced in Louisiana, and then shipped to the Midwest on barges or through pipelines, and then stored on tanks on farms. However, ammonia is also useful for making illegal methamphetamines, and thefts are a regular problem. (KOMU-TV, "Law Officers Fight Ammonia Thefts", May 19). If a thief injures himself tampering with an ammonia tank, should he be able to sue the farmer for the injury? Three states, Kansas, Missouri, and Wyoming, say no, and provide immunity for those who store, handle, or own ammonia equipment from suit by thieves. Legislatures are considering the issue in other midwestern states.

I find this hard to argue with, unless of course you are a tort lawyer and want to sue over anything any time. In fact, I have an even better idea. I propose the following law:

Citizens shall be immune from any suit for injuries or damages incurred by someone committing a crime against them.

Runaway ADA Lawsuits - and My Proposal

This post could also be titled Reason #634 to be scared of doing business in California. In a frightening trend, California passes yet another law giving citizens and their lawyers seeking unearned windfalls to police small, picky violations of regulations by filing large and expensive-to-fight suits (see also sue-your-boss law) From the central Californian Santa Maria Times the story of Jarek Molski, who makes a very good living for himself suing public businesses over tiny, technical ADA violations:

Molski's suit against the Hitching Post in Casmalia alleged a wheelchair ramp was too steep, and the bathroom wasn't accessible because the toilet was a half inch too close to the wall; and the sink was three inches too high, and the soap dispenser was too high.

What do such picayune violations cost? Mr. Molski averages a $20,000 settlement in such cases, though usually demands much more at first. And, by the crazy Unruh law in California, targets get no time to redress these faults before up to $4000 per day per violation can be extorted sued for.

So is this an isolated incident? Well, Mr. Molski is but one person in the ADA lawsuit business, and

As of Friday, 528 cases were listed under Molski's name in federal civil courts

Without reasonable standards, and with huge gains to be made for picayune rules interpretations, one victim summed it up this way:

"I've talked to about five people in Solvang and Cambria who have been sued twice in the last year," Stricklin said. "They're stuck. Unless you close your doors, somebody else can come along and sue you, and that's why we're fighting. If they can see that we're not going to roll over and settle, they'll think twice about going to trial."

My Proposal

So, I would like to propose my own Unruh II law. I propose that in California, every citizen now has the right to sue any other person they observe violating any sort of traffic law. If you observe someone speeding, doing a rolling stop at a stop sign, failing to signal a lane change or turn, with a burned out tail light, not wearing a seat belt, jaywalking, etc, you may now sue them for $4000 per occurrence.

Coming in future posts, I will propose Unruh III to empower citizens to sue over health code violations, Unruh IV to empower citizens to sue over fire code violations, and Unruh V to sue anyone for any reason if they have a net worth higher than you do.

Employment Suits

It seems like a huge percentage of the people we fire for cause, even after warnings and write-ups, etc, immediately threaten to sue us or report us to the Department of Labor or both. Several times a year, I get contacted by an employee's lawyer, though generally nothing comes of it except wasting a lot of my time. Ditto the Department of Labor. According to George's Employment Blawg, we are not alone:

In many Federal district courts, employment-related litigation represents 50% or more of all court filings, and approximately 98% of lawsuits are resolved outside of court.

Small businesses (i.e., businesses with fewer than 50 employees) are not exempt either. This newsletter notes that it is not uncommon for such businesses to have 3 or 4 claims of employment discrimination annually!

Beyond this explanation, there are also people out there who want to deal with all problems through litigation. I have had people send lawyers after the company when they never once brought their concerns to a manager -- they just went straight to a lawyer, either because that is the modern way or because they are looking for an opportunity for an easy pay-off.

Something I would love to see, but will never happen, is a list of "serial litigators" to avoid. I know a couple of people tried this but got shut down. Too bad. We had one such person seek employment at one of our establishments. This is all this person does for a "living" - seek employment, show up at the job interview limping with a cane, and then suing people for discrimination if he is not hired. Apparently this person has nearly a hundred different lawsuits going.

Adverse Effects of Lawsuits

For this post, I will leave aside for a moment the unfairness of monetary penalties for ridiculous claims or the incredible erosion of individual responsibility that is being created by jackpot litigation.

In addition to these problems, runaway litigation is causing people and organizations everywhere to take defensive postures to protect themselves from suits, and many of these defensive tactics are generally not in the public's interest. Here are some examples:

One area that bothers me a lot is the area of safety engineering, whether it be for cars or whatever. I was a mechanical engineer at an oil refinery for several years. A big part of my job was assessing if a certain condition was "safe" or "unsafe". Very often, I was working with shades of gray - safety is never absolute. In fact, the only real way to make a refinery 100% safe is the same way you make cars 100% safe: you don't have any.

The way we dealt with the gray was to have a lot of discussion. I might observe that I was concerned with a certain situation, and my colleagues and I would discuss it. With some additional research, we would generally reach a consensus on the best approach. Because we usually made these trade-offs with an inherent bias to err towards safety, I can't think of a decision we made that led to a problem. We did have several fires/explosions, and one man was killed in one of these, but each and every one was generally caused by some combination of factors we never anticipated, e.g:

there was a steam leak under the insulation of that pipe, and since the pipe was running at a lower temperature than expected, the water condensed, and it turned out the water had an unexpected contaminant such that when it came in contact with the flange bolts it caused an unusual crack propagation mode, made worse by the fact that the flange bolt material was not the kind specced because the vendor had made a mistake on delivery, and the flange eventually gave way and a fire started.

Yeah, this really happened- I include it to say that the situation is never like on the TV mini-series -- evil corporation skimps on 30 cent part knowing it created an unsafe situation. Safety engineering means tough trade-offs, and, after a ton of work, problems usually occur in an area no one imagined.

Anyway, this is the type of thing I used to do, and doing it well relied mainly on open, honest dialog about safety problems. Nowadays, however, my sense is that this open dialog in corporations may soon be over. Corporations are legitimately worried that some young engineer like myself might have written a memo about a potential hazard, and that this memo will end up being exhibit A in some plaintiffs case that the company "knew about" some hazard and did nothing about it. Think about all the cases you hear about, even the recent Vioxx case -- the center piece of every plaintiffs argument is often that the company "was warned" and is therefore truly evil, because it knew of the problem and did nothing. The words "smoking gun memo" are practically attached to these lawsuits, but I have always asked myself - are these smoking guns that point to culpability, or are they in fact pointing to a robust safety engineering process?

So, if we have gotten to the point where having internal people asking questions and challenging the company's product and process safety makes companies more vulnerable to lawsuits rather than less, then companies are going to start clamping down on the open internal dialog about safety. And then the world really will be a less safe place.

UPDATE

Having written this post, I had a flashback to a training video I was shown early on at Exxon. The video was anti-trust training, and the only message I remember is "don't write it down". The message was mainly aimed at sales people, who tend to be gung ho and competitive and say things like "lets go out there and crush the competition this week". This is all fine and good for Joe's Auto Body, but written on an Exxon letterhead, it becomes the central exhibit of some anti-trust trial. Thus the don't write it down advice. Anyway, I will be very sad, but not surprised, if they are now showing this video to the engineers as well.

You Get a Lipstick, I get $24 Million

From Overlawyered: Another lawsuit where customers get the coupon, and lawyers get the cash. I would love to see the use rate on the coupons out of these suits. I have gotten a few for like $1.24 off something that I threw away. I mean, in several cases, the company was offering better coupons in the Sunday circular.

Though I thought it was kind of silly at first, I am coming around to supporting legislation that attorneys should get paid in the same currency as customers.

Also from Overlawyered is this good news about courts finally taking legal action against people who file fraudulent suits and claims:

A Fayette minister and a teacher are going to prison for their role in submitting phony Fen-Phen drug settlement claims in Jefferson County

Good, though we might have to have a massive amnesty in Mississippi or half the state could end up in jail.

What struck me is not necessarily the doctors' actions, which are representative of the state of mind of doctors across the country, but the whiny reaction:

"Actually what they`re doing is going against their doctor`s oath. The patient is more important than malpractice insurance and they have to realize that," said Washington County Hospital patient Brian Levasser.

Remember, these doctors have stopped doing elective surgeries. So Mr. Levasser's penis enlargement or whatever will have to wait a few days. He sounds just like Kip Chalmers on the train in Atlas Shrugged.

OK, here is something Mr. Levasser can try: Go to work each day, work long hours, and do your absolute best in a critical profession. Then, each day, just before you go home, roll three dice. If the result is anything but 1-1-1, go home, have a beer, and relax with your family. However, on that unlucky day when you roll three ones, you lose everything - your job, your house, your savings, your reputation and your ability to work again in your chosen profession. Note that you lose everything not because you did a bad job, but because something unlucky but inevitable happened (e.g. child born with a birth defect) and you were the one standing closest. On the day after you rolled that 1-1-1 and lost everything, tell me malpractice insurance isn't important.

(By the way, I am sympathetic to the first comment on the Club for Growth post. Those of us in general business can sometimes get frustrated that doctors seem to be able to get attention on their frivolous suits where the rest of us cannot. But I refuse the begrudge them that, and wish them well)

Jackpot Litigation

For those who still hold out belief that the tort system today is still primarily about justice rather than just hijacking deep pockets, read this post at overlawyered.com. From an online ad:

We will show you how to prove you had taken Vioxx, to prove that you had related side effects, and to find a good lawyer to win your case. There are still places selling Vioxx after the recall, you can find them online. Merck is still 100% fully responsible for any side effect. If you purchase Vioxx now, not only you can sue Merck, you can also sue the pharmacy store for selling recalled products. The purchase is risk free, as Merck will pay you every penny you spend on Vioxx including tax and shipping fees.

Quick, buy some before they take it off the shelf, so you too can get in on the lawsuit!

By the way, this little tidbit, also via Overlawyered.com, gave me a chuckle. A woman is suing a railroad for hitting her when she was walking down the railroad tracks. In part, she is suing the train for "failure of its engineer to...yield the right of way". LOL - I can't believe the train didn't swerve out of the way.

Hmmm. I am one of the listed disciples (lol). I am willing to believe the ad is non-serious, meaning that it was aimed more at getting traffic and probably was not written by a law firm, and am posting an update as such with a link to this site.

Hoax? In my mind, its a hoax only if the legal advice is wrong or if you think no one would respond to the plea. I can't tell you if Vioxx can still be bought nowadays (that may be a hoax). However, if it was still on the shelf somewhere, ask yourself two honest questions:

1. Is there a lawyer out there who would happily try to make the case that a person who bought Vioxx after the recall can still be awarded damages? Even if the attorney knew the person bought the Vioxx mainly to get in the class action?2. Are there people out there who, if they thought it would get them in on a big class action, would go out today and load up on Vioxx solely to get a chance at having a lawsuit?

The honest answer is yes to both (just read the billboards in Florida). I mean, I would bet about any amount of money that someone out there has read this on the Internet and has tried to go buy Vioxx to get in on the jackpot. Guaranteed. Would any of you take the other side of this bet?

The fact that this ad may not be from a real lawyer does mean that I may have overstepped in painting law firms as being this bad (sorry), but I don't think its being fake in any way hurts the case that the notion of individual responsibility is on life support in this country.

By the way, after looking at Walter Olson's original post, I think he was pretty careful not to claim that the page was from a real law firm, and basically pointed to the same issues with the page's provenance that Legal Underground pointed out.

In the companies I have run, I have spent an inordinate amount of time dealing with a few really ridiculous lawsuits. Here are two examples (that happened to companies I ran - this is not Internet hearsay or friend of a friend):

A visitor to one of our facilities claims to have stepped, while walking in his bare feet, on a nail that was on the ground. He did not come to us for first aid, but called us later after he had left our facility. He never could produce the nail, nor could we ever find one in the area, but we agreed to pay any small bills he had -- we assumed he might have gone to the emergency room for a tetanus shot or maybe to get a band-aid. It turns out he eventually claimed that the injury caused him to - get ready - experience sexual dysfunction, which he eventually sued us over when we refused to pay any treatment costs.

A woman came to our office at our facility limping, claiming to have fallen down the stairs and saying that we were gonna pay. Despite the fact that it was a crowded area, no witnesses could be found. We offered her a ride to the hospital which she refused. Several of our employees thought we saw her come into the facility limping already. Within the week, she was threatening to sue us for the cost of her knee operation. Fortunately, since our employees saw her limping coming in, we did some more research, and members of her family told us she was also suing a restaurant she had visited the week before for the same injury. It turns out she was uninsured, and had hurt her knee elsewhere, and was out trying to find some public business that she could get to pay for her operation.

Given this experience, I am not going to apologize for believing that the referenced ad might be real.

UPDATE #2:

By the way, I don't think that Legal Underground was calling the train story a hoax, only the Vioxx. By the way, the exact wording on the complaint against the railroad is even better than I thought:

"The [engineer] did not stop the train in a timely manner, and failed to yield the right of way to a pedestrian walking along the tracks in plain view"

that the railroad was negligent for failing to post signs warning 'of the dangers of walking near train tracks and that the tracks were actively in use

Lets leave aside the obvious point about individual responsibility, and ask what would happen if this were the legal standard, to have such signs. To make sure someone saw one, you would have to have one say every 30 feet. Since there are just over 200,000 miles of freight railroads in the North America that works out to a bit over 35,000,000 signs that need to be posted. At $100 per sign this would cost $3.5 billion.

Here is the serious point: Never would any legislature pass a law that said there had to be warning signs every 30 feet on railroads. It would be way too costly for little benefit. At grade crossings today, we have signs and flashing lights and even gates and still thousands of people a year drive in front of trains on grade crossings. So, if we would never require it legislatively, how have we gotten to a point where a jury might effectively retroactively require such signs, and assess a multi-million dollar penalty for not doing it?

Litigation a Growth Business in Florida

"Litigation is the No. 1 growth area. It's always recession-proof," said Peter Prieto, executive partner of the Miami office of Holland & Knight, in an interview.

If only our economy was litigation-proof. We operate in Florida because there are a lot of great recreation opportunities there - you can't transport them out of state. I am not sure why anyone else who could move their business out of Florida actually stays there.

Jeb gets a lot of press for being smarter than his brother George W., but George made a lot more progress on tort reform than Jeb has in his state.

A Primer on Workers Comp.

When I first started this blog, I promised myself I would take the time to post featurettes on small business topics for which business school really did not prepare me. The first such feature was on buying a business.

This week, I turn to the topic of workers comp. insurance. Never in 2 years at one of the more storied business schools in the nation, nor in nearly 20 years at the largest corporations in the world, did I once encounter the topic of workers comp. Now, since I bought my own business, I spend inordinate amounts of time dealing with it.

This article will focus on workers comp. from the employers point of view (most state web sites are useless to employers - they have reams of detail for workers on how to file claims or complaints, but nothing to help employers learn how it all works).

oyote Background

The workers compensation system, which is generally run state by state, has evolved as a win-win for workers and employers. Workers are guaranteed some minimum level of medical treatment and disability pay for their on-the-job injuries, and employers avoid the possibility of lawsuits for work-related injuries. As summarized in this Insurnace Information Institute article:

Workers compensation insurance covers the cost of medical care and rehabilitation for workers injured on the job. It also compensates them for lost wages and provides death benefits for their dependents if they are killed in work-related accidents, including terrorist attacks.

Workers compensation systems vary from state to state. State statutes and court decisions control many aspects, including the handling of claims, the evaluation of impairment and settlement of disputes, the amount of benefits injured workers receive and the strategies used to control costs.

Given the incredible proliferation of lawsuits in this country, for all its faults, the workers comp system is probably better than the alternative. The article cited above has more on the history of workers comp as well as a nifty table of state by state benefits and requirements. As with almost any governmental practice in this nifty Federalist system we have -- small business owners in multiple states, Beware. Every state does it differently.

Note that workers comp is generally "no fault". This means that it does not matter if the worker was hurt because the employer had an unsafe workplace or if the employee was ridiculously careless -- most everyone gets compensated. AllBusiness.com has more detail:

Workers’ compensation laws rely on a "no fault" rule that provides benefits regardless of who is responsible for a workplace injury. There are exceptions, however, for employees who hurt themselves due to reckless behavior or drug or alcohol abuse. In addition, employees who cause self-inflicted injuries or injure themselves while off-duty or while engaged in a criminal act usually do not qualify for benefits.

There are also a wide variety of state laws regarding what types of employees qualify for workers’ comp benefits. Some states exclude contractors and consultants, volunteer workers, farm workers, domestic servants, and certain other groups. States also enforce different rules about whether part-time employees qualify for benefits.

Note that I will link to some more in depth tutorials at the end of the post.

First Step - Buying Insurance

If you live in any state except Texas (where the requirements are optional), you MUST purchase workers compensation insurance for your employees. As noted above, some may be exempt from coverage (owners, senior officers, some contractors) but if you have any paid workers at all, you will likely need a workers comp. policy. In most states, you will call a broker, though in a few, like Washington, Wyoming, Ohio, W. Virginia and N. Dakota, you will call the state workers comp office because there are no private carriers allowed to compete with the monopoly state fund. In other states, like Arizona, there is a state fund but it competes with private carriers.

Most business insurance agents deal with workers comp., but they can sometimes be fussy about what business they take on, especially in states with workers comp. messes like California and Florida. So, there are a couple of things that you will be asked for in the first 30 seconds of a phone call, so you might as well be ready.

First, as with any insurance matter, they will ask for a loss run or loss history. Ask your current or previous broker for it. If you don't have any history, don't worry. Unlike with say, getting a loan, getting workers comp. insurance can actually go more smoothly without any history (history only seems to be able to hurt you, not help you much).

Second, they will ask what "class codes" your labor force is. This refers to a set of four digit numbers that have been devised to categorize different types of jobs, much like SIC codes classify business types. A good agent should be able to figure out your code(s) from your description of the business, but if you want to get a head start, you can find a listing here, courtesy of Insurance Guys. Depending on the state and the insurance company, you may be allowed multiple class codes or you may be required to have just one. For example, we have some operations that combine campground jobs (expensive) with store and clerical jobs (less expensive). However, most workers comp carriers make me call all of these workers campground (the most expensive class). The only way to get the store workers at a cheaper rate would be to for a second subsidiary for stores with just the store workers and a separate workers comp. policy.

Third, they will ask for your total payroll, usually in dollars, by state, for each of these job class codes. Most will take your word for it up front, but will audit you and your payroll records sometime during the year to ensure that the premiums are calculated on the right total. Some insurance companies, as well as most state run programs like in Washington state, will require monthly or quarterly payroll reporting. When you set up your payroll with a company like ADP or Paychex, you should make sure you set up your departments so you can get the workers comp data you will need.

What's my "mod"

Finally, the broker will ask you for your workers comp. experience "mod", short for modifier. If you do not know what an experience mod is, you soon will. A company called NCCI collects premium and loss data from most all the carriers for most businesses. If they are tracking your company, you should get a report like this one from them (OK, the NCCI site has a web site design that won't let me link to the actual page - grrrr. Click the link above, and find "how to understand your experience rating worksheet" under the learning center heading.).

(click image for full size)

Experience mods take into account your premiums paid and your losses as compared to other companies in the same job class code. A modifier of 1.2 means you are 20% worse than average in claims history than others in your job code. Note that all history is not the same - I do not know the exact formula, but I do know that 10 claims for $5000 each will be treated as worse than 1 claim for $50,000, even though the total amounts are the same. Given this, it would really help if workers comp insurance policies could have a deductible, but many states do not allow this (I posted on this problem here). NCCI has a description of this whole rating process here.

One thing to remember -- NCCI uses the amount your insurance company has reserved for a particular claim, not the actual payouts to date. In many cases you will find, on an open claim, the insurance company may have paid out $5,000 to date, but may have say $15,000 total reserved, meaning they estimate the payouts might reach that point some day. Check with your broker to make sure your insurance company is closing claims in the system. Once the claim is closed out, then the experience mod will use the sometimes lower actual rather than reserved number. Also note that experience mods are built up over a three year period, and often the last year is not included. So, for a renewal date of June 1, 2005, your experience mod probably includes claims from June 1, 2001 to June 1, 2004.

How is My Rate Calculated?

Your base rate will depend on your state and your job class. Rates are usually stated as premium dollars per hundred dollars of payroll. Rates vary all over the map. Store or clerical workers might be just a few dollars per hundred. Our campground workers are $9-$20 per hundred. Roofing workers can be $25 and up. So if your rate is $6.00 per hundred, and you have $100,000 in annual payroll, your base premium will be $6,000 per year (ouch).

Now, here is why we spent so much time with experience mod. This base premium is then multiplied by your experience mod to get your actual premium. So, if you have an experience mod of 1.3, your premium in this example would be 1.3 times $6,000 or $7,800. (By the way, beyond just the audits, this is why trying to hide payroll does not pay. If you hide payroll, for the same experience, your experience mod will go up and your premiums will go up -- in the long run, you are not going to save any money).

When you see your workers comp rates, you may be tempted to self insure (we, for example, pay over $200,000 a year, and that is with a good experience mod). Be forewarned that in most states, this is very hard to do. There is just too much history of small companies failing to make required payments. You CAN do it in many states, but it requires credit checks and bonding, and as a small business you will probably need to hire a third party to do the claims processing.

Help, No One Will Insure Me!

In certain industries and certain states, it can be very hard to find coverage. For example, because campgrounds have a higher than average history of accidents, and because it is not a large market, many insurers won't touch our class code. One of the first thing an agent will do is to check to see if the companies he represents will write for your class code(s). By the way, this is also one of the first things that an employee outsourcing company will check, to see if they want to do business with you. In addition to difficulties with certain class codes, certain states, like Florida, can be a problem. For example, our company used to have a national policy that covered all 11 states that we were in. Several years ago, that company stopped writing certain states (California and Florida were the first they dropped) and I have had to systematically stitch together coverage from multiple brokers and companies. I currently have 5 policies to cover 10 states.

This is the kind of situation that can quickly lead to panic - workers comp insurance is required, but you can't find anyone who will provide it. Fortunately, states have recognized this situation and generally have an insurer of last resort or state fund who will cover you, though you may not like the price. You can learn more about these insurers here-- keep clicking "next" at the bottom for more. The article goes across several pages. I would like to say that these state funds provide a backstop to make sure you will be insured, but that is not necesarily the case. Not every state has an insurer of last resort or state fund. And, though it surpised me the first time it happened, state funds can turn you down. SAIF, the state fund in Oregon, turned our company down for reasons I do not understand to this day (we have a perfect zero claims record in that state). Fortunately they were just our backup option, and a private insurer had already accepted us.

By the way, do not wait until the last minute to pursue your workers comp policy or renewal - expect at least 2 weeks for a decision, and even then the decision could be "no, we won't cover you" and you will have to start from square one. (Update: I have been told that in CA, if you go directly to the state fund, it can take 4-6 weeks to get a decision, but a private broker can get you into a State Fund policy in days. I never tried to go direct, but I have a State Fund policy via a private broker and can attest it was pretty quick that way. As you should with any other aspect of California business, assume that CA workers comp. is more expensive, more difficult, with more litigation land mines and more anti-business traps than most any other state you deal with).

Filing Claims and other details

First, like a lot of other HR type issues, many states require certain workers comp related materials to be posted in the workplace, along with minimum wage posters, etc. You insurance company should provide you with these posters as well as with claims forms and a claims process. Make sure to use thei insurer's claims process, and teach your managers to carefully document all injuries. Not only will you need detail about how the injury occurred, but you will also need to keep track of the days of work the worker missed due to the injury. Give the insurance company the facts and get out of the way. There is a lot of potential liability today from denial of deserved workers comp benefits, and you do not want to be in this loop. It is your insurance company's job to determine the validity of the claim and benefits. Leave that to them. If you suspect fraud, detail that to the insurance company but then let them run with it.

Depending on the company, your insurance company will probably give you a few other tools to help manage costs. First, they may have a deal with a local HMO or provider network to provide diagnosis and care. Try to route your workers to this network - it can save a lot of time and money. Also, insurance companies often offer free risk analyses and on-site audits. By all means take them up on it - its one of the last free services around and can really have value. Finally, insurance companies are increasingly recommending process changes to your HR process to provide for new employee physicals (to baseline pre-existing conditions) and for drug and alcohol testing (because injuries related to these are not compensable).

Conclusion

Hopefully some of this has been helpful. NCCI has a more complete training package here (same site problem - click on "Introduction to Workers Compensation" under Learning Center and then click it again on the next page). More detailed state by state data is in this article. I have never worked with these guys but mostchoice.com seems to have an informative web site. In putting together this post, I also used the Insurance Guys web site -- they have contacted me in the past and if you are out in CA, they claim to be able to have access to many different underwriters to get folks the best policy. Cal-Nevada Insurance did a good job for me. I have related posts on workers comp here and here.

By the way, many states have broken workers comp. To give you a hint at the problems, the number of injuries per hour worked has fallen for decades, but the workers comp costs per hour worked still keep going up. The reason is that the cost to treat a given injured worker has risen at more than twice the overall rate of inflation for health care. But we will delve into this in a future post.

If you don't know, Florida is one of a couple of states (California and New York are others) that national carriers of workers comp insurance avoid because it is such a mess. Fraud is high, costs are high, benefits are low.

I found a new reason to dislike Florida workers comp today. Apparently, there are lawyers out there in Florida advertising that a worker will never get their fair shake out of the insurer unless they hire a lawyer. We have an ex-employee who was injured in a vehicle accident while at work. A claim was filed, and the workers comp system is processing the claim (though a bit delayed due to 4, count them 4 hurricanes to hit Florida in one month). So, for some reason, the employee has hired a lawyer. I do not know what he will get with the lawyer, but this is an awful trend, because the only redeeming feature of the workers comp system is that it keeps lawyers and their costs out of it. I have no idea how the lawyer gets compensated, but I am sure at some point, I will be paying his fees one way or the other. If the employee is paying for him directly, I really feel bad for the employee, because I don't know what value he is getting for his money.

So, the lawyer, putting in a good 15 seconds of work (which he probably bills an hour or two for) pulls a xeroxed set of discovery questions and sends them to me. There are thirty four questions, all with things I have to look up or xerox and send to him. None of them are tailored to this case, so most will end up being irrelevent and all my info gathering a waste of time. So, not only is there the cost of the attorney's fees adding to the process, but the externalities of the cost of my and my employees' time to feed him with data. All to probably get the same recovery for the patient the system would have given him without intervention.

This is what I really dislike about the law profession nowadays. They are the only people except for the government who can arbitrarily demand a ton of my time calling up data that no one will ever look at. Other people try this - for example, some vendors have sent me huge credit applications that would take weeks to complete - but in their case I can say "no" and tell them if they insist, they don't get my business. Lawyers and the government, though, can demand arbitrarily intrusive and time-consuming document collection and there is not a thing I can do about it.

Business Insurance Agents

Insurance was a very scary topic for us this year. As many of you know, the cost of business insurance has skyrocketed since 2001. Our workers comp, auto, and liability insurance costs have ballooned to 10% of sales, which seems incredible to me, particularly since we have nothing really bad on our claims history.

However, this year, at renewal time, the problem went way beyond cost. As background, much of our business is in running campgrounds. Campgrounds have the same liability problems as any public contact business, in that there are more and more people out there who, if they slip and fall on your property, will try to get a financial windfall out of it by suing you. This is multiplied in campgrounds, as the possibilities for a customer hurting themselves accidentally are multiplied over a more controlled environment, like a store.

Now, leave aside for a minute the justice of whether or not we should be responsible if someone pulls their hamstring climbing a tree in our campground. Even when most of these cases go nowhere, they generate defense costs. So, liability rates have been going up.

One of the things I have learned about the insurance market, though, is that carriers pick and choose what industries they want to be in. And, the industries they don't want to be in are those that are relatively small but have higher liability potential -- too much risk of loss for too little income. Unfortunately, this seems to include campgrounds.

So, just a few weeks away from the expiration of our old policy, my old agent tells me that their underwriter will not write us for the next year. Either in our liability policy (for reasons above) or for our auto policy (because we have a lot of older drivers) or for our workers comp (same issue, older workers).

I was therefore faced not with a huge cost increase, but with the prospect of no insurance, which would mean shutting down my business (beyond the stupidity of operating without insurance, my contracts forbid it). My insurance agent at the time had no other alternatives.

This is when I learned a huge lesson - there is a big difference among business insurance agents. Many have only one or two underwriters they work with, and if those underwriters drop your line of business, you can be out of luck. It is desperately important, especially if you are in a tougher than average business to insure, to have an agent with access to many underwriters and sources of insurance.

In the end, I pieced the workers comp together state by state through many agents, which was a total pain. Finally and at the absolutely last minute, for the liability and auto, I found an agent who really knows what he is doing. He got me quick fix policies for these to keep running, and then has found better policies over time to replace them. We have had great discussions about trade-offs in liability coverage (since every policy is different in the small exceptions that they make in their coverage). By the way, I don't know if they are even looking for more business, but if you are in a crisis, particularly if you are in the southwest, you might try these guys.

Why can't I have a Workers Comp Insurance Deductible?

Today, we had another $300 workers compensation claim.

First, I will begin by saying "Thank God for the workers comp system in this country". Basically the philosophy of the system is this: Workers give up their right to sue their employer over workplace injuries in return for a guarantee of medical care and a defined benefit compensation system. Yeah, some states (like Florida, in particular) have some real fraud and management problems. In California last year, before reform, I was paying $20 in workers comp premiums for every $100 in wages -- and this despite having no claims the last few years. But, given the state of the lawsuit industry in this country, imagine the effect if workers could sue over every injury, large or small. Shudder.

As an aside, this issue has greatly affected the whole asbestos litigation situation, as detailed here. It can be argued that most workers' asbestos injuries are more likely due to poor protections on the job site, rather than any product problems from the asbestos makers. Asbestos using companies, after all, have known asbestos is dangerous since before WWII. In fact, navy shipyards in WWII were some of the worst offenders in terms of not using masks, poor ventilation, etc. But, since employers generally can't get sued over injuries (and its hard to sue the feds), lawyers concentrate on the "product labeling" argument and sue the asbestos makers into bankruptcy, which explains why litigation attorney's coach their clients like this.

Anyway, in many states, workers comp needs reform. Ahnold, for example, did a nice job of attacking this issue in California, and our company got an immediate 10% discount on our rates once the legislation passed. One thing that is never discussed and frustrates the heck out of me is the issue of deductibles. We get a lot of small claims (e.g. went to emergency room, got checked out, all was OK, went home). As with any kind of insurance policy, filing a lot of small claims this year is death on premiums next year. Workers comp is worse than most, as it has an experience mod system that guarantees that for every dollar in claims that goes out this year you pay an extra $1+ next year in premiums (in the next few days Coyote Blog will be starting a new series called "things they didn't teach me in business school" and the mechanics of workers comp will be one of the first posts).

Unfortunately, many states, such as Arizona, do not allow you to have a deductible on your workers comp policy. This is not an insurance company practice that might change with new competitors, but the law. So, we keep paying out small claims that probably drive up our premiums $2 for every dollar in claims.

Avoiding Difficult Customers

This blog will often touch on the insanity that is the current American tort system. I don't think there is any greater threat to capitalism, due process, or democracy than the growing power of the litigation bar.

Via Overlawyered.com, which should be an essential part of your daily blog browsing, comes this story. Apparently, after being sued by Okaloosa County for making defective police cars, Ford refused to sell the county any more of this type car. The County sued again, this time to force Ford to sell it more cars of the type it is suing Ford for being defective:

One of Morris' attorneys, Don Barrett, has said the sheriff firmly believes the Police Interceptors are defective but he wants to buy new ones to replace aging cars because seeking other vehicles would be more costly.

lol. Unfortunately, in the service business, it is legally more difficult to exclude customers from the premises. We have several well-known customers who come to our campgrounds (plus Wal-mart and any other private retail establishment) desperately hoping to slip and fall and sue. In a future post, I will tell the story of a Florida campground that is being sued by a visitor for sexual dysfunction after the visitor allegedly stepped on a nail in their facility.